As the province’s affordable housing crisis has deepened, some pundits, press and landlords have taken advantage to draw attention to New Brunswick’s so-called “double tax,” which apparently explains high rents and the dearth of affordable housing. Some landlords have even co-opted tenants’ urgent requests for support in a bid to have taxes on their income properties lowered.
Not surprisingly, this idea has caught on with other members of the business establishment. We’ve heard that paying tax twice is unfair and runs counter to province’s development strategies.
News stories report that the tax thwarts the building of affordable apartments, and keeps developers from investing in the province. It also supposedly saddles tenants with extra-large rental bills as landlords attempt to recoup this exorbitant expense.
We’re told that this tax is the only one like it in Canada. Global News, for instance, reported that “New Brunswick is the only province in Canada with non-owner occupied tax.”
When the Conservatives announced in 2020 that they would reduce and eventually eliminate the tax, the CBC cited Willy Scholten of the New Brunswick Apartment Owners Association, who asserted that he hoped the elimination of the tax would mean that New Brunswick is “no longer offside with the rest of the country.”
New Brunswickers can be forgiven if they thought the so-called double tax was unique to the province, and that eliminating it would lead to more construction and lower rents.
But it turns out the truth lies somewhere else.
The New Brunswick Coalition for Tenants Rights has long questioned if the double tax is indeed as burdensome as its opponents claim. Our analysis, aided by the research of students at the University of New Brunswick Tax Law Clinic, has helped us identify some of the myths of the so-called “double tax.”
Myth #1: New Brunswick imposes a double tax
Although the tax is commonly described a “double” tax, the adjective is deliberately misleading. In New Brunswick property owners are subject to both provincial and municipal taxes, the same way we pay both federal and provincial income tax.
In order to make home ownership affordable, the province provides a tax credit to owner-occupied properties. In real terms, this tax credit results in owner-occupied properties not paying the provincial portion of their property tax.
This does not necessarily penalize landlords for renting their properties. The taxpayers just don’t get the homeownership credit on their non-owner occupied residential properties. Early applications of this property tax scheme even allowed for owner-occupied duplexes to take advantage of this tax credit, something the province could revisit today to help make home ownership more affordable for small landlords.
Myth 2: The so-called double tax is unique to New Brunswick
Property tax structures are unique to each province and municipality. But many other Canadian jurisdictions impose both provincial and municipal property taxes, including our neighbors in Nova Scotia and PEI. So, the so-called double taxation is not unique to New Brunswick.
In fact, other regions impose increased property taxes for unoccupied properties, including Vancouver, Toronto and British Columbia under a regime called a “vacancy tax.”
Myth 3: The elimination of this tax scheme will result in more affordable housing units
Landlords and developers falsely claim that New Brunswick’s current property tax scheme disincentivizes building more affordable housing.
First, although the costs of property taxes in the province are high relative to many other regions in the country, they are deductible for income tax purposes for landlords and developers. While these tax deductions do not erase the cost of the tax, it is partially offset and less than we are being led to believe.
Second, not-for-profit landlords building low-rent units are also afforded a tax exemption from the provincial portion of the Assessment Act. This means that the so-called double tax is not the impediment to low-income affordable housing that landlords and developers would have us believe.
As the New Brunswick government determines how to best accommodate the competing interests of landlords and tenants in the province, there are more important issues to keep in mind than reducing taxes for apartment owners.
First, there is little evidence to suggest that providing landlords with the same provincial tax credit afforded to home owners will result in lower rents. If the pandemic has taught us anything, it is that landlords are willing to raise rent dramatically even in the most dire of circumstances, all in the name of profit margins and market rates.
Second, New Brunswick cannot afford to give home ownership credits to landlords for their income generating properties. In 2010, the provincial portion of the tax brought more than $60 million in revenue. Given New Brunswick’s limited tax base and social needs (the province is the poorest in the country), the elimination of this tax will drain much-needed money from provincial coffers and impact the province’s ability to provide social services, including affordable housing. This is likely why the province halted the “double tax” reduction plan in place for this year.
Finally, there is no evidence that this tax is an impediment to affordable housing in the province.
In this regard, the debate surrounding this issue is a red herring designed to enrich developers. It is important that we debunk the so-called double tax as an important first step in imagining social change that will actually support tenants in the province. Let’s focus our discussions on what really matters – strengthening protections for tenants and increasing investments in cooperative and not-for-profit housing.
Kristi Allain is an Associate Professor in the Department of Sociology at St. Thomas University and an organizer with the New Brunswick Coalition for Tenants Rights.
A version of this commentary was published in the Telegraph-Journal on April 12, 2021.