Federal government announces improvements to rental support policy, CEWS and CEBAOctober 9, 2020
View the most up-to-date information on federal relief programs on RCC’s guide to COVID-19 Relief Measures.
Fundamental Changes improve Federal Rental Support Program
The federal government has announced long-awaited improvements to its rental support policy, while also extending the program to cover the period from October 2020 through June 2021.
RCC has been heavily involved in pushing for changes to the previous CECRA program and a significant number of changes we have pushed for have been adopted.
One of the biggest departures from the former CECRA rent assistance program that wrapped-up in September is that tenants will be able to apply directly for support through the Canada Revenue Agency, instead of having to rely upon their landlord(s) to apply for the program through Canada Mortgage and Housing Corporation (CMHC).
The new program will be named the Canada Emergency Rent Subsidy (CERS) and will cover up to 65% of eligible rental or mortgage interest expenses for those who have seen revenue reductions year-over-year – with an additional 25% of eligible expenses covered for those shut down by a mandatory public health order.
At a 70% year-over-year revenue loss or greater, the support will cover 65% of rental costs. For those who have seen year-over-year revenue reductions of less than 70%, the level of support under CERS will decrease on a proportional sliding scale.
The new CERS program shares features with the CEWS wage subsidy program in that they both provide for a sliding scale of support, calibrated based on revenue loss and, as with CEWS, will be continued until June 2021. We also understand that the Canada Revenue Agency CEWS wage subsidy engine will provide for a common application process for CEWS and CERS.
The following highlighted elements were not mentioned in today’s announcement and have instead emerged in discussions between RCC and senior officials.
Notably, the CERS program looks like it will extend to a greater range of rental settings and to companies of greater size levels than was the case with the previous CECRA program. We understand that the former limitation to enterprises with under $20 million of annual revenue will be dropped and that a cap of $300,000 in total assistance on a go-forward basis will be imposed instead.
RCC also understands that the subsidy will apply to locations with up to $75,000 of gross monthly rent, up from $50,000 of gross monthly rent under the CECRA program. Further, we understand (but do not have formal confirmation) that locations with gross monthly rent of over $75,000 may still be eligible for support on that first $75,000. This is obviously a critically important issue and we wil be seeking further clarification.
Today’s announcement provided limited details and further development and explanation of the policy has been promised for next week, on which we will of course elaborate to RCC members.
Government Improves the Canada Emergency Wage Subsidy Program (CEWS)
The CEWS program has been significantly adjusted to provide a subsidy for up to 65% of eligible wages until at least December 2020 and potentially until June 2021 (it was to have dropped sharply on October 25, essentially losing half of its value for most claimants).
In essence, the government has frozen the support level at that of the previously announced Period 8 (i.e. September 27 to October 24, 2020), which is calculated as 0.8x YOY revenue loss.
For companies with YOY revenue losses of up to 50%, the maximum subsidy (at 0.8x) is therefore 40% of eligible wages.
Members will also recall that for those with YOY revenue losses in excess of 50%, there is a top up subsidy of 1.25x the revenue loss between 50% and 70%, which maxes out at a subsidy for 25% of eligible wages, bringing the maximum total subsidy to 65% (i.e. 40% base + 25% top-up).
The CEWS program appears to be otherwise unchanged.
Canada Emergency Business Assistance Program (CEBA)
A refreshed CEBA program will provide small businesses that attest to revenue losses during the pandemic with a loan of a further $20,000, of which up to $10,000 can be turned into a grant as long as the rest is repaid according to a schedule to be announced. Applications will open shortly and will be open until December 31, 2020.
See also: CERS holds new promise for retailers who were left out in the cold under CECRA