The Proposed Taxes On Out-Of-Province Homeowners Are Ill-Considered
Posted April 8, 2022
Nova Scotia’s attack on out-of-province homeowners is excessive and poorly aimed. It needs to be rethought.
Periods of surging house prices attract speculative buyers who are content to leave the properties vacant until they decide to sell. That further crimps the supply and adds to the upward pressure on prices.
Some provincial governments have introduced property tax measures to deter that behaviour. British Columbia was first. Its program (speculation and vacancy tax) focuses on empty homes in areas having housing shortages.
The speculation and vacancy tax is 0.5% of assessed value for Canadians and 2% for foreign owners. Higher provincial rates apply on very expensive homes. In addition, Vancouver has a 3% of assessment empty home tax. The provincial tax does not apply to regions not having housing shortages.
Ontario’s tax affects transactions by foreign buyers but does have an annual component. It was recently increased to 20% of the purchase price and has been expanded from the urban region centered on Toronto to encompass the entire province.
Non-resident property owners in PEI are limited to a maximum of 5 acres and 165 feet of water frontage. Their taxes have for many years been 50% more than for Islanders.
These programs are moderate in scope and, in the case of Ontario and British Columbia, tightly focused. By comparison, Nova Scotia’s proposal looks like a sledgehammer.
Non-residents are charged an additional deed transfer tax of 5% of price at time of purchase and an extra property tax of 2% of assessment every year unless rented full time to Nova Scotians. That more than triples their property taxes. Non-residents are not protected by the assessment cap. Nor does the province promise to repeal the tax if the housing shortage abates.
This proposal misses targets it should hit and hits targets it should not. A Nova Scotian can sit on six empty condos in Halifax waiting for the price to go up and not be affected.
A New Brunswicker will be penalized for her cottage near Tatamagouche that is not winterized, even though it is not suitable for year-round use. So will a Torontonian who occupies his property near Wolfville in summer and rents it out during the academic season at Acadia.
The Fox Harb’r and Cabot Links resorts have expensive housing that makes sense if you are wealthy and a keen golfer but will not be good value for someone who is commuting to work.
Most hurtful of all is the impact on people who have decades-long relationships with their Nova Scotian communities. The Herald has been deluged with letters to the editor.
Tom writing from Toronto is an eighth generation Nova Scotian who comes every year to his place near Lunenburg, close to the rest of his family. He donates his time and money to local and provincial organizations that are part of the community fabric.
So does Julie from Connecticut who has come to Nova Scotia every year this century and has a small off-grid cabin on a lake in Annapolis County.
Joan and Gary from Ontario, who lived and worked in Nova Scotia for 33 years spend four to five months a year in their unwinterized cottage on the North Shore so they can visit their children.
Rob and Susan of Atlanta, whose roots are in Yarmouth County, bought their property more than two decades ago. They are in their seventies and are finally able to replace annual visits of a few weeks with extended stays of five or six months.
Andrew in Chester Basin tells us that there are many such vacation homes, some of which are owned by successive generations of families. If an American sells their summer house in Chester to a cottager from Halifax the availability of full-time housing is not improved.
Joe in Musquodoboit Harbour tells us that communities with lots of long-time summer people will suffer economically if they are driven away without replacement.
Out-of-province visitors are light users of government funded services. They or their province pay for whatever health care they receive, and they don’t have kids in schools. Their daily purchases contribute to the province’s economy and tax revenues. For their substantial municipal property taxes they ask only for road maintenance, garbage pickup, and the hope of a firetruck if needed.
Based on mailing addresses for tax bills, the government estimates that there are 27,000 properties owned by non-residents across the province, with an aggregate assessed value of $3.28 billion. Beyond that they know nothing: how many are rented, how many are winterized, how many are occupied when their owners are not there, not even how many there are in each municipality.
Not all parts of Nova Scotia are experiencing a housing crunch. Is there a big unmet demand for year-round housing in Shelburne, Bridgetown, Arichat?
To impose a drastic tax measure while knowing so little about the impact will earn the government a reputation for capricious choices. It would be irresponsible.
Nova Scotia could proceed now with the additional deed transfer tax for out-of-province buyers not planning to move here, perhaps higher than the proposed 5%.
The punitive new annual tax on longstanding property owners, many with deep roots here, will upset not only them but also their families and many close Nova Scotian friends.
The proposal needs thoughtful consideration. It should be postponed until much better data is available, and the impact on communities and closely connected out-of-province owners has been understood and evaluated.
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