Urgent Action Needed to Tackle Out-of-Control Commercial Rent Crisis, Report Warns

Small businesses need urgent action on the commercial rent crisis that is out of control in Ontario.

A report, called Out of Control, by the Better Way Alliance, says the COVID pandemic has deepened a pre-existing crisis – unaffordable commercial rent that is shutting down small businesses. 

“Even before the pandemic, rents were so high that it was difficult – sometimes impossible – for small businesses to break even or tuck away a small profit for a rainy day. Media headlines regularly shared news of businesses forced to close because of increasingly insurmountable rent costs. In Ontario, there are 400,000 small businesses, and across Canada small businesses employ almost 70 per cent of people in the private sector,” says the report.

“Small businesses are the heart of vibrant, friendly communities – places to gather, do some shopping, and take care of errands. Entire neighbourhoods are named for the diversity of the small businesses and people that inhabit them. Places like Little Jamaica, Little India, and Chinatown enliven our cities. But a lack of commercial rent protections in Ontario is threatening small businesses, the jobs they have created, and the vibrancy they bring to our communities. 

“People who are not small business owners may be shocked to learn there are neither guidelines for fair and predictable rent increases nor set standards for leases and shared costs. Commercial landlords can charge, change, and do almost anything they want. It is legal to increase rent by any amount. Landlords can evict small businesses in favour of new tenants or leave the space vacant, even after small business owners have paid out-of-pocket to renovate their space. Landlords can pass on surprise bills for thousands of dollars at their sole discretion. They are not held to basic building maintenance repair or heating and cooling standards. Commonly accepted guidelines and standards that exist for residential tenants are not in place for small business tenants. And, there is no official mechanism to resolve disputes between commercial landlords and tenants. This leaves small business tenants at the mercy of landlords, whose property investment appreciates in value with or without rental income. Even the most savvy small business owners have little leverage to negotiate fair lease agreements.”

The commercial rent affordability crisis is threatening their livelihoods, the jobs they create, and benefits they bring to neighbourhoods. It is clear that action is needed by the Ontario provincial government to remedy the commercial rent affordability crisis for small businesses, added the report.

The commercialrent.ca website was launched to bring awareness to the issue.

Aaron Binder, Director of the Better Way Alliance, said the business group put together a survey of its members and a few non-members in late 2021 and 2022 because it had been receiving a lot of feedback about rent costs and lease agreements.

“We’re hoping to develop some deeper dives into the philosophy of free market versus fair markets in relation to commercial property,” said Binder.

“We’re a group of businesses that advocate for ethical employment, for decent work, paid sick days, higher wages, fair scheduling practices. All of our businesses exemplify these ideals and we’re across every industry in Canada. 

“And the evidence we see not just from our businesses but from across the globe is that when you treat your employees well, they treat your business well.”

The report found that nine in 10 small businesses list rent as one of their top three expenses. For over half, rent accounts for more than 60 per cent of overall expenses.

The report added that three quarters of small businesses have experienced a one-time rent increase of 10 per cent or more; one in six have experienced an increase of 50 per cent or more; one in 10 have seen their rent double during a single increase. 

It also said that over 40 per cent of small businesses have moved in the past due to rent increases or difficulties with their leases or landlords. Over half anticipate being forced to move at the end of their current lease for these reasons.

The report said the provincial government must:

• Create rent guidelines for year-overy-ear increases that apply to all commercial tenants, including new tenants;

• Standardize leases to ensure fairness and transparency for shared costs, and ensure priority is given to existing tenants when lease term is up; and 

• Create a mechanism to enforce rules and resolve disputes.