Among the bottom-line findings in a recent survey released by a Hawaii business coalition: Commercial landlords are under pressure to collect rents from tenants, in part to pay property taxes; and more tenant rent relief is needed for many businesses to avoid permanent closure.
Struggles to cover pricey rents for commercial space is not a new challenge here. In the thriving pre-coronavirus economy, survival of cash-strapped businesses sometimes hinged on the mercy of landlords, who could opt to evict and find a replacement tenant with relative ease. That option has faded, due to the COVID-19 pandemic.
In the interest of helping to keep afloat the kamaaina-focused economy, the coalition — Chamber of Commerce Hawaii, Hawaii Restaurant Association, Retail Merchants of Hawaii, Hawaii Lodging and Tourism Association, financial institutions and shopping center owners — is seeking $100 million in federal coronavirus aid from the city to benefit commercial property landlords and tenants.
The coalition’s request holds potential to deliver financial lifelines, but it also adds up to a big ask — slightly more than one-quarter of the $387 million Honolulu Hale has secured through the $2.2 trillion Coronavirus Aid, Relief and Economic Security (CARES) package passed by Congress in March. So far, the largest chunk, about $130 million, is reserved for COVID-19 first-responder costs.
To address the city’s failing economic health, $50 million in CARES funds already is being used for grants going to Oahu businesses with no more than 50 employees or $2 million in gross annual revenue and a commercial address. And $25 million to $50 million is allocated to an individual hardship program that provides up to $1,500 a month to pay household and child care expenses for up to six months.
The city’s sensible approach of starting the recovery programs with smaller funding pots, which can be replenished if deemed successful, should also be applied to this commercial-landlord request. What’s more, while there’s a deadline — CARES money must be spent by Dec. 31 or be returned to the U.S. Treasury — providing enough funding for public health costs must rank as the top priority.
Under the coalition’s proposed aid program, landlords could apply for grants from the city on behalf of multiple tenants demonstrating rent hardships. The size of such grants would be limited to a landlord’s annual property tax obligation. Tenants would then receive grant proceeds directly from the city that they pass along to landlords through rent.
Two strings attached to this deal: Participating tenants would have to be local businesses — no national retailers. And landlords would be required to reduce rent for participating tenants. Both are seemingly reasonable requirements amid pandemic uncertainty. The aid program should also prioritize landlords lacking deep pockets.
About 99% of all businesses here, employing at least half of the the state’s workforce, are small businesses (500 employees or fewer). Operations with 100 or fewer employees make up the largest slice of the sector. There’s no doubt that the bulk of these businesses need more relief. With many forced to close for months through no fault of their own, they are confronted with fixed costs — with rent figuring prominently — that they’re losing the ability to pay.
In the coalition’s survey of 1,234 businesses statewide most reported receiving federal aid through the Paycheck Protection Program or another U.S. Small Business Administration program. However, it also showed that from April through June, 10% paid no rent while 25% paid partial rent to landlords, which resulted in an estimated tally of $59 million in unpaid rent.
The survey’s findings are the latest red flag that more relief aid is needed to help homegrown businesses make financial ends meet.