Government Response Measures
June 3, 2020 | Canada
As this unprecedented situation continues to rapidly evolve, Avison Young’s briefing notes are intended to provide an up-to-date assessment of the impact on the commercial real estate market.
Period covered: May 16th to 29th, 2020
Federal relief programs paying off, but more may be needed…
Emergency federal aid to date is nearing $152 billion in direct spending, which has pushed the country’s deficit to an estimated $260 billion this fiscal year. Recent figures show that two of the government’s biggest relief programs have reported increases in applicants and payments. The Canada Emergency Response Benefit (CERB) now has more than 8.2 million applicants who have collectively received more than $40.3 billion – exceeding the program’s budget of $35 billion. Meanwhile, the federal wage subsidy program, or Canada Emergency Wage Subsidy (CEWS), has now approved more than 284,000 claims, releasing $7.9 billion (total budget of $73 billion) in aid to companies to cover 75% of wages for almost 2.8 million workers. Though the government indicated that the CEWS benefit, which helps employers cover the cost of employee wages, will be extended until August, the same may be required of the CERB benefit.
Now accepting applications
On May 25th, Prime Minister Justin Trudeau announced that applications were being accepted for the Canada Emergency Commercial Rent Assistance (CECRA) program for small businesses. First introduced on April 24th, the program continues to raise more questions than answers, including who it benefits the most, and whether landlords will participate in the process or not. In short, over the duration of the program, landlords will reduce rent by at least 75% for the months of April and May (retroactive), and June, for their small business tenants. CECRA will cover 50% of the rent, with the tenant paying up to 25% and the landlord forgiving at least 25%. This program is for small business tenants that are paying less than $50,000 per month in gross rent, with annual consolidated revenues of less than $20 million, and that have experienced at least a 70% revenue decline compared with pre-COVID-19 numbers. It will also be available to non-profit and charitable organizations. In anticipation of the high volume of applications, the administrator of the program, the Canada Mortgage and Housing Corporation, will stagger the intake applications based on the size and location of the commercial property. Meanwhile, property owners will be allowed to submit their applications according to the following timetable:
- Monday, May 25th: Property owners located in Atlantic Canada, British Columbia, Alberta and Quebec, with up to 10 tenants who are eligible for the program
- Tuesday, May 26th: Property owners located in Manitoba, Saskatchewan, Ontario and the Territories, with up to 10 tenants who are eligible for the program
- Wednesday, May 27th: All other property owners in Manitoba, Saskatchewan, Ontario and the Territories
- Thursday, May 28th: All other property owners in Atlantic Canada, British Columbia, Alberta and Quebec
- Friday, May 29: All property owners across Canada
Though no numbers had been released at the time of writing to show how may applications had been received, the Parliamentary Budget Officer (PBO) noted an estimated 80% acceptance in the program. While acknowledging no precedent for its estimate, the PBO’s method of estimation included a review of NAICS four-digit industry group classifications, combined with a review of qualified corporate tax filings. The link to the application process and documents can be found here: https://www.cmhc-schl.gc.ca/en/finance-and-investing/covid19-cecra-small-business
The spread of COVID-19 and the containment policies being introduced are changing rapidly. While information in the briefing notes is current as of the date written, the views expressed herein are subject to change and may not reflect the latest opinion of Avison Young. Like all of you, Avison Young relies on government and related sources for information on the COVID-19 outbreak. We have provided links to some of these sources, which provide regularly updated information on the COVID-19 outbreak. The content provided herein is not intended as investment, tax, financial or legal advice and should not be relied on as such.