Nova Scotia is proposing to pressure property owners outside the province with two taxes, which the government says will help overcome the growing housing crisis by freeing up housing for provincial residents.
The province says it is responding to the housing crisis caused by post-pandemic population growth, especially in Halifax. Critics of the measure, however, say it is not only unfairly targeted at Canadians outside of Nova Scotia with rising property tax bills, but will ultimately prove to be an ineffective part of political theater.
Under the legislation under discussion, non-residents will face two taxes. There will be an annual 2 percent property tax in the province in addition to the existing property taxes. The second is tax for transfer of a deed paid at the time of sale, as 5 percent is charged on the higher of the purchase price or the estimated value of the property.
This is the annual property tax that generates the most controversy, especially since it is applied during rising house prices. Owners of non-residential properties are already facing a sharp increase in taxes, as the increase in their annual property valuations is not limited, unlike those for locals in Nova Scotia. The new measure will increase the tax increase on 27,000 properties held by owners outside the province.
Mike Sullivan, an Ottawa resident, says his property taxes will triple nearly three times on a summer house in Mahone Bay, NS, which he and his wife built on vacant land in 2008. This summer shelter is not a cramped cabin , 3,000 square feet and two floors. But that’s also not compound 1 at the center, he says.
“This is not a mansion, we do not own an island,” added the 62-year-old pensioner.
In the short term, his annual property taxes will jump to $ 15,000 from $ 5,500. But he worries that the bill could get much bigger as property values continue to rise, with forecasts behind the envelope showing that his annual tax could reach $ 30,000 within a few years. Ironically, Mr. Sullivan was born in Halifax and his mother still lives in the countryside. But that’s not enough to qualify for Nova Scotia’s tax-exempt status.
Mr Sullivan could have avoided the pinch of the new tax if he had rented out his house to a Nova Scotian for the whole year. But that will negate the meaning of a summer retreat.
He says he and his wife are likely to eventually sell the property because of higher taxes – adding that he would never have bought his plot and built a house if the tax had been in place. “No one in their right mind will pay three times more taxes than their neighbors.”
But any sale could be caught off by another targeted tax planned by the Nova Scotia government, which will require buyers to pay a 5 percent fee at the time of purchase. Sellers do not pay this tax, at least directly. But this tax, along with the annual fee, will make such summer homes less financially attractive to buyers outside the countryside.
In a statement, the Nova Scotia government said the province’s population was growing at its fastest pace in decades and was working to ensure that housing remained affordable, adding that the price drop was no longer limited to major urban centers. The government said it expects the two tax measures to increase the supply of housing available to Nova Scotians and generate revenue. (The provincial budget estimates that the two taxes will take $ 81 million in the current fiscal year.)
However, the Association of Real Estate Brokers in Nova Scotia says the burden of the tax will fall on properties far from the areas where the housing crisis in the province is most severe. Paige Hoveling, a spokeswoman for the association, said her organization welcomed the intention to increase affordable housing stocks.
But the group says many of the tax-covered summer homes are not suitable for year-round living. And in many cases, they are too far from cities and big cities to be viable options for Scots who are struggling to find affordable accommodation. This warning certainly applies to Mr. Sullivan’s rural property, which is more than a 45-minute drive from Halifax.
Lars Osberg, a professor of economics at Dalhousie University, reiterated the point, saying he did not believe the proposed tax measures would have much effect, especially as population growth is concentrated in Halifax.
A statement from the Nova Scotia government also said other provinces had introduced similar measures. He did not point out that neighboring New Brunswick was heading in the opposite direction, with a plan to halve property tax rates for non-owner-occupied homes – including those owned by residents outside the province.
However, other provinces, including British Columbia, have introduced taxes on non-residential homes. But the BC version is structured very differently, especially in that it applies to both BC residents and non-residents. However, overlapping exemptions and loans mean that almost all British Columbians are exempt from the tax, with only 1% paying the provincial tax.
Mr Osberg said the rationale for the tax was not so much about the economy, but much more about political calculations, “to give it a look”. And there aren’t many political negatives in taxing those who can’t vote in provincial elections, he said.
Mr. Sullivan has his own point of view, born of his personal history in the Littoral. The tax interferes with a parish strip in the countryside, a fine resentment of those whose local roots do not go back generations. “The expression is ‘Come from afar,'” he said.
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