Trudeau’s Rent-Relief Plan Hits Trouble With Delays, Disputes

(Bloomberg) -- Prime Minister Justin Trudeau’s plan to help Canada’s small businesses pay their rent is off to a slow start, with some landlords hesitant to sign up and others bogged down by red tape.

The federal government said earlier this month landlords had applied for only C$90 million ($66 million) from a rent assistance fund on behalf of about 26,000 tenants. That’s less than 5% of its estimate of C$2 billion when the program was introduced in April.

The program has been hobbled by a complex and time-consuming administrative process as well as flaws in the policy’s design, small-business advocates say. They say it’s too hard for tenants to qualify and the financial burden is too high for smaller landlords.

The stumbles may threaten the viability of the program, making it too little, too late for the businesses that need it most.

“Rent relief is kind of make-or-break for over half of business owners out there,” said Laura Jones, chief strategic officer at the Canadian Federation of Independent Business. “So to not get this program right is going to have big consequences. It’s likely already having some consequences.”

The program allows landlords to apply for the program on behalf of tenants that were paying less than C$50,000 a month in rent and have lost at least 70% of their revenue compared with before the pandemic.

Trudeau proposed sharing the burden. Tenants would pay 25% of their rent, landlords would agree to temporarily reduce rent by 25% and the federal and provincial governments would provide a forgivable loan for the remaining 50%.

Steep Price

The 25% reduction in rent collections is too much for small landlords, who have their own creditors to pay, and has caused many of them to avoid signing up, Jones said. Making only businesses that have lost 70% of their revenue eligible excludes too many other firms that are struggling, she said. The program covers rent for April through June, which is too soon to end it considering very few businesses expect to be back to normal in July, she said.

Provincial governments, which have most of the authority over commercial real estate rules in Canada, have stepped in to try to revive the plan. Quebec has announced a moratorium on evictions and is reducing the obligation of landlords to a 12.5% rent cut. Ontario announced a temporary ban on evictions until Aug. 31, emulating similar moves in provinces including British Columbia and Saskatchewan.

Alberta introduced legislation on Tuesday that would prevent landlords from evicting tenants that had to shut their business because of public-health measures or who lost at least 25% of their revenue because of the pandemic.

While the province’s conservative government has clashed with Trudeau on many issues, Tanya Fir, Alberta’s economic development minister, credited the federal government’s response to an unprecedented situation. The province has earmarked C$67 million for the rent-relief program and has introduced a number of other measures that should help vulnerable businesses survive the downturn, she said.

“Both federal and provincial governments are trying to find that balance between rolling out programs in a timely manner, but realizing that the quicker you do it, they’re not going to be perfect,” she said in an interview. “The longer you wait, you might have it better figured out, but then people are struggling.”

Unavoidable Bankruptcies

Despite the slow start, the program may gain traction in the weeks ahead. RioCan Real Estate Investment Trust, one of the country’s largest retail landlords, has sent out 1,600 applications for the program on behalf of tenants and is planning to enroll even more, Chief Operating Officer Jonathan Gitlin said.

The company is working “as hard and as quickly” as it can to get the relief to tenants, but the application process requires a lot of work and documentation on behalf of each tenant, he said. Still, he said the program is “thoughtful” and has a sound rationale that has encouraged RioCan to participate.

Despite all of the government programs, it may be unavoidable that some tenants’ businesses will fail, he said.

“You’re going to have a lot of other businesses like restaurants and smaller gyms and other places that certainly are going to find the landscape changed,” Gitlin said. “Given the social-distancing measures that are out there even once some of these business can open up, and even with governmental support, they are unfortunately going to find it hard to cope with these new realities.”

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