A new iteration of property expense relief will be more bountiful for many recipients than recent payouts of the Canada Emergency Rent Subsidy (CERS). However, fewer commercial tenants or owner-occupiers will qualify for the 28-week post-CERS programs, which are set to launch on October 24.
Finance Minister Chrystia Freeland has unveiled two streams of targeted support measures to succeed the imminent expiry of CERS. Lockdown support, equivalent to 25 per cent of eligible property expenses for the affected period, will also remain available for businesses where public health restrictions result in a minimum 25 per cent erosion of revenue. Relief will be offered until May 7, 2022 with potential for a further eight-week extension to July 2.
“We are announcing what we very much hope and believe is the final pivot in delivering the support needed to ensure a robust recovery,” Freeland remarked. “Our economy is rebounding and we are winning the fight against COVID. It is also true, though, that the recovery is uneven and the health measures that are saving lives continue to restrict some economic activity.”
The government has established what it terms “two-key” eligibility for the new programs, which requires applicants to demonstrate a loss of revenue during a protracted period of the pandemic, as well as an ongoing struggle to catch up. This is meant to target a smaller number of beneficiaries with the most profound need at a time when many former CECRA and/or CERS recipients have regained momentum.
“We had appealed to the government as late as last week to implement some kind of extension, and we think this is a good approach,” says Brooks Barnett, director of government relations and policy with REALPAC. “There are some businesses that obviously have need for that extra support. Restaurants, in particular, are still trying to recover and they’ve faced some regionally based challenges with some provinces having been in lockdown longer than others.”
The new Tourism and Hospitality Recovery Program will subsidize wages and property expenses for businesses that have suffered both a minimum 40 per cent decline in revenue in the 12-month period from March 2020 to February 2021 and a minimum 40 per cent decline in the months pertinent to their applications. Until March 13, 2022, qualifying businesses — which might include hotels, restaurants, travel agencies and tour operators — can receive subsidies on par with the level of revenue loss, up to a maximum of 75 per cent of eligible costs. That will be reduced by half for the remaining eight weeks, taking subsidies down to the range of 20 to 37.5 per cent of eligible costs.
Other types of enterprises that saw revenue drops of at least 50 per cent during the March 2020 to February 2021 reference period and also record 50 per cent declines relative to pre-pandemic times in the months between now and May 7 are eligible for the new Hardest-Hit Business Recovery Program. Funding is more modest than allocations for the tourism and hospitality sector, with a formula that provides subsidies to cover 10 to 50 per cent of qualifying wage and property expenses during the first 20 weeks of the program, and 5 to 25 per cent for the period after March 13.
The diminishing subsidies follow a pattern seen in CERS, which has pushed down maximum coverage thresholds over the past four months. Those dipped from the original 65 per cent to 60 per cent on July 4, then to 40 per cent on August 1 and finally to 20 per cent on September 26.
“On a per business basis, the new programs are more robust than under CERS. There will be fewer entrants to the programs overall, but they will be well compensated for revenue losses,” Barnett says. “We think this is a fair levelling off of the support.”
He also commends the decision to increase the ceiling for eligible property expenses for applicants with more than one business location. Under CERS, it topped out at $300,000, but it will be elevated to $1 million beginning October 24. That’s in keeping with recommendations that a coalition of commercial real estate associations — including REALPAC, the Building Owners and Managers Association (BOMA) and the real estate development organization, NAIOP — submitted to Deputy Prime Minister Freeland earlier this year.
“The overall coverage point for multi-locational tenants was too low to provide sufficient support for those with a number of locations. Raising that to $1 million is a lot more in line with true costs,” Barnett maintains.
Meanwhile, the Canadian Federation of Independent Businesses (CFIB) is expressing concern for businesses that have been excluded. It’s calling for less onerous revenue-based criteria for admittance and a broader definition of what constitutes a tourism and hospitality operator.
“Gyms, recreation facilities like bowling alleys, dance studios, drycleaners all continue to suffer massive COVID-related losses, but may be ineligible for the higher levels of support,” says Dan Kelly, the CFIB’s president.
Barbara Carss is editor-in-chief of Canadian Property Management.