Far and away the number one question we have been asked of late has been “what did Property Council propose to government in terms of a rent subsidy”. Prior to this week’s announcements we have been cautious with our sharing of this document, but today the embargo lifts and we explore what opportunities the Government missed.
One of the main priorities for Property Council has been how we alleviate the stress in the whole property system.
We believe New Zealand’s commercial property sector will play a vital role in supporting small and large businesses to manage through the economic impacts of COVID-19 and our primary focus was on ensuring the Government understood the necessity of the property sector to the health of the wider economy.
As the key body representing New Zealand’s large and small commercial property owners, Property Council is keen to ensure that appropriate support is available to tenants during this difficult time. We therefore commissioned a working group of its members (with assistance from advisors) to develop practical solutions for discussion with Government and officials. This has included input from all sectors – office, retail and industrial as well as large and small organisations and geographically spread. As you will appreciate, this was been convened at short notice and whilst we attempted to develop our recommendations as fully as possible, we recognise that not every matter of detail will have been considered.
In our discussions with government, we proposed a support package for commercial tenants facing a 50% loss of revenue. This comprised multiple components that would have provided immediate relief to tenants so they could continue to meet their contractual obligations. Proposals included a deferral of rent by landlords facilitated by the tax system and a targeted rent tax credit for tenants with direct financial assistance via a mechanism similar to the Government’s wage subsidy.
The underlying principle of this submission was not about supporting landlords, but about supporting tenants so that the entire property ecosystem could continue to operate.
Unfortunately, the wet hand shake offered by the Government this week has done little to provide immediate relief for those tenants unable to pay their rent.
“The ability for tax losses to be carried back to the previous financial year will be a buffer for some, providing additional cashflow for businesses. However, if your business was not previously making a substantial profit, or if you are a not-for-profit organisation, there’s little relief in this announcement. The question remains, will this help tenants pay some or all their rent and fulfil their contractual obligations?” says Property Council chief executive Leonie Freeman.
“It’s clear the Government is taking a holistic approach to supporting the property sector, which is understandable given the circumstances, but we believe more support will be needed for businesses that occupy tenancies now and in the next 6-12 months.
“Small businesses are struggling to pay rent and in turn many mum-and-dad commercial landlords, and in some cases larger property owners, are finding it difficult to meet their mortgage obligations. While the new rules are commendable, they won’t stop this from happening, they simply give everyone more time before lenders can act,” says Freeman.
While the decision has been made not to support the industry specifically at this time, Property Council will be continuing to advocate for additional support, particularly in the retail and hospitality sectors, as we move toward recovery.