renter

Editorial Cartoon by Graeme MacKay, The Hamilton Spectator – Thursday April 2, 2020

If we want the economy to recover, we need to bail out tenants and property owners, too

The federal government recently introduced a plan to encourage businesses to retain workers by subsidizing 75 per cent of their wages. By providing laid-off and self-isolating workers with an alternative to employment benefits it should help limit social, economic and financial disruption from the pandemic. Rather than let the economy tailspin, the hope is to engineer a successful recovery once the virus is contained. If business activity and consumer confidence vanish, getting the economy back off the ground will be hard.

We need to expand this plan to the real estate sector. For many newly laid-off people, neither expanded Employment Insurance nor the new Emergency Response Benefit will be enough to cover rent or mortgage payments. But homeowners in Vancouver and tenants in Toronto typically have much higher monthly obligations than those in Moncton and Trois-Rivières. Issuing the same federal cheque to everyone would not be fair. Commercial tenants are just as diverse: their ability to pay rent today depends on how hard the virus has hit their business and that varies from case to case and region to region.

On the positive side, banks rebuilt their capital over the past decade and most commercial landlords, because of strong recent growth, have resources to deal with temporary difficulties. But the scope of the current crisis is unprecedented: large numbers of homeowners could soon stop paying their mortgages, while many real estate owners could default on their commercial mortgages as both tenants stop paying rents. This would force banks to take large write-offs, quickly depleting their capital and potentially throwing the country into a financial crisis.

Such an outcome can be avoided by providing rapid and targeted mortgage and rent relief where it is most urgently needed. Because governments are already over-extended, banks and real estate owners should manage the programs I’m proposing, with government limited to providing funds, liquidity and loan guarantees. Minimizing the government’s role and putting the onus of implementation on banks and landlords would encourage efficiency and speed. (Continued: Financial Post) If we want the economy to recover, we need to bail out tenants and property owners, too

The federal government recently introduced a plan to encourage businesses to retain workers by subsidizing 75 per cent of their wages. By providing laid-off and self-isolating workers with an alternative to employment benefits it should help limit social, economic and financial disruption from the pandemic. Rather than let the economy tailspin, the hope is to engineer a successful recovery once the virus is contained. If business activity and consumer confidence vanish, getting the economy back off the ground will be hard.

We need to expand this plan to the real estate sector. For many newly laid-off people, neither expanded Employment Insurance nor the new Emergency Response Benefit will be enough to cover rent or mortgage payments. But homeowners in Vancouver and tenants in Toronto typically have much higher monthly obligations than those in Moncton and Trois-Rivières. Issuing the same federal cheque to everyone would not be fair. Commercial tenants are just as diverse: their ability to pay rent today depends on how hard the virus has hit their business and that varies from case to case and region to region.

On the positive side, banks rebuilt their capital over the past decade and most commercial landlords, because of strong recent growth, have resources to deal with temporary difficulties. But the scope of the current crisis is unprecedented: large numbers of homeowners could soon stop paying their mortgages, while many real estate owners could default on their commercial mortgages as both tenants stop paying rents. This would force banks to take large write-offs, quickly depleting their capital and potentially throwing the country into a financial crisis.

Such an outcome can be avoided by providing rapid and targeted mortgage and rent relief where it is most urgently needed. Because governments are already over-extended, banks and real estate owners should manage the programs I’m proposing, with government limited to providing funds, liquidity and loan guarantees. Minimizing the government’s role and putting the onus of implementation on banks and landlords would encourage efficiency and speed. (Continued: Financial Post)