Rent relief on the way, but some firms will be left behind
April 24, 2020
Focus Area—Canadian Economics
The Conference Board of Canada’s Senior Economist Richard Forbes offers the following insights on Prime Minister Trudeau’s announcement of the Canada Emergency Commercial Rent Assistance:
“The Canada Emergency Commercial Rent Assistance program announced today will lower rent for several small businesses by 75 per cent throughout the second quarter of 2020. That is welcome news for many businesses, but firms that have already decided to close shop permanently or are unable to pay 25 per cent of their rent are left behind.”
- The Canada Emergency Commercial Rent Assistance program will provide forgivable loans to qualifying commercial property owners. The loan will cover 50 per cent of three monthly rent payments if the property owner agrees to reduce eligible firm’s rent by at least 75 per cent for the months of April, May and June.
- To be eligible, the property owner must rent their property to a business that pays less than $50,000 per month in rent, and have had to temporarily shut down operations, or have experienced at least a 70 per cent drop in revenues due to COVID-19.
- The federal government will cover 75 per cent of the loan, while the provinces and territories will cover the remaining 25 per cent.
- Although there was no announcement for large businesses, Mr. Trudeau stated today that help for those firms will come soon.
- While the program will ensure that some small businesses remain afloat during the pandemic, it will not help all companies suffering from the crisis. Many firms have already decided to close shop permanently or cannot afford to pay the 25 per cent of rent they would be still be responsible for. Those companies will be out of luck.
- Today’s announcement reinforces our forecast that many businesses will be in dire straits over the second quarter of 2020 due to the global pandemic. The program—along with other recently announced government stimulus measures—will help provide relief for many companies. However, we still expect Canada to experience its worst economic downturn in decades this year.