The Canadian Response to the COVID-19 Pandemic

Winter 2020/2021 Issue
  • By:
  • Rebecca Askew, Natalie Dash, Anand Pye

The government acted rapidly to prop up the economy, including supports for rent and personal income.

When the COVID-19 pandemic swept across Canada in March 2020 and businesses began shutting their doors, Canada’s federal government moved quickly with a series of wide-ranging economic support measures. The measures included a $2,000-a-month benefit for those forced out of work; wage subsidies to help businesses keep their employees; interest-free loans for businesses; mortgage deferrals; and a rent-assistance program for small- and medium-sized businesses. Of these programs, the Canada Emergency Commercial Rent Assistance (CECRA) program provided the most direct support for NAIOP's members impacted by COVID-19.

CECRA was aimed at helping small-business tenants with a 70% or greater drop in revenue. Under the program, eligible tenants would have their rent reduced by 75%, with the federal government paying 50% of the rent directly and the property owner covering the other 25%.  While CECRA was initially welcomed as much-needed support for a struggling retail sector, it soon became clear that the program was complicated, plagued by technical difficulties, and overly burdensome for property owners. Some of the problems were:

  • While many small businesses were struggling, they had not yet met the 70% revenue loss threshold in the initial three months of the qualification period either because some sales continued through direct delivery or a shift to online sales.
  • Landlords were responsible for making applications on behalf of their tenants, but only one application was accepted per property, and no amendments were allowed. This made it difficult for property owners with multiple tenants. Landlords were also required to vouch for their tenants' reported losses.
  • Property owners were required by the program to forgive 25% of the rent.
  • CECRA was only available to businesses with rents of less than $50,000 per month.

There were numerous technical concerns, including the government’s ability to protect sensitive leasing information, the calculation of revenues, and how partial eligibility should be handled.

While many large landlords made an effort to participate, other landlords were harshly criticized in the media for not joining the program. Frustrated provincial governments, responding to calls from struggling businesses, then instituted moratoriums on commercial evictions. CECRA was a flawed program with good intentions, but it led to many unintended consequences that helped neither landlords nor tenants.

NAIOP's Canadian chapters, recognizing the growing trouble, arranged a virtual roundtable with the senior federal officials responsible for the program from the Department of Finance and the Canadian Mortgage and Housing Corporation. More than 325 NAIOP members from around Canada participated in the discussion. The NAIOP Roundtable and continued ongoing advocacy allowed our members to pose questions, highlight program deficiencies and get a better understanding of government objectives.

As criticism of CECRA continued throughout the early fall and a second wave of the pandemic approached, the federal government announced a new program to replace CECRA that took into account recommendations from NAIOP members, tenants and other property owners.

The new Canada Emergency Rent Subsidy (CERS) boasted significant improvements over CECRA:

  • It will provide up to 65% of rent or mortgage payments for businesses suffering revenue losses due to COVID-19.
  • Instead of requiring a 70% decline in revenues, any businesses with a decline in revenue may apply and will receive a gradually decreasing amount of support depending on revenue loss.
  • An additional “top up” subsidy of 25% will also be available for businesses temporarily shut down by a mandatory public health order, bringing the total available subsidy up to 90% for certain businesses.
  • CERS will be directly accessible by tenants instead of requiring property owners to undertake the arduous application process on behalf of tenants.

And, it appears that the government will allow most businesses to access the program regardless of size but with a cap on the total amount of funding dispersed per location and per company.

NAIOP and its members played an important role in dramatically improving the federal support program in a way that will be a great relief for property owners dealing with a major economic crisis, tenants and businesses trying to survive and, ultimately, benefit Canadians across the country.

While expensive, these initiatives have been a lifeline for Canadian businesses throughout COVID-19. CECRA supported over 130,000 small businesses and 1.18 million jobs in Canada in the first wave, even though only $1.8 billion of the $3 billion funding envelope was dispersed. As CERS is rolled out and additional improvements are made, this program will likely see a greater uptake as it becomes more attractive to the commercial real estate industry.

The Canadian government has pulled out all the economic stops to help Canadians weather COVID-19. Out of a population of 37.5 million, more than 3.7 million Canadians have had their jobs supported to some extent through the Canada Emergency Wage Subsidy, and another 8.9 million have received monthly unemployment support through the Canada Emergency Response Benefit. More than 765,000 emergency business loans have been approved as of early October.

The federal government, Parliament, and all the provincial and territorial governments found a way to work together across partisan political divides. In discussions with both provincial and federal officials, it was clear that they were happy that the usual political and jurisdictional differences could be set aside. Per-capita deaths and infections were also lower than the U.S. experience.

However, the success of these programs and Canada’s economy depend on factors mostly outside of the government’s control. Canada’s recovery relies on an improving world economy driving demand for Canadian exports, implementing public health measures to keep COVID-19 cases low, and delivering successful vaccines and treatments. While significant progress has been made on these fronts, Canada is not out of the woods yet.

 

Rebecca Askew

Rebecca Askew is the chair of NAIOP Greater Toronto’s Government Relations Committee and senior legal director at Cadillac Fairview.

Natalie Dash

Natalie Dash is a senior government relations consultant with Campbell Strategies, a Canadian government relations and communications firm.

Anand Pye

Anand Pye is the executive director at NAIOP Edmonton.