By Don Mills
Opinion
The decision by the Nova Scotia government to impose increased deed transfer costs of five per cent and property taxes of two per cent of the assessed value of non-residential property is short-sighted and will not significantly improve either the availability or the affordability of the housing in the province.
Nor will it substantially increase tax revenues in a province with a budget of $11 billion. But it will alienate a group of people who have been good citizens, as well as important brand ambassadors for the province, and it will hurt the province’s reputation as a welcoming place to live, visit and invest.
Non-residential property owners represent a relatively small percentage of property owners in the province (only 3.6 per cent in 2020 compared to four per cent in 2019) and are more likely to own properties in the more rural areas than in the urban communities where housing demand is highest due to increasing population. In fact, only 2.2 per cent of all residential properties in Halifax are currently owned by non-residents.
In any given year, the number of properties sold to non-residents is extremely low, likely less than one per cent of all the properties sold in the province in any given year, and doesn’t significantly impact housing demand.
Don Mills founded pollster Corporate Research & Associates in 1978. Mills sold the company in 2018 to his top three executives. The Notebook photo.
The population in the rural areas of the province is largely stable, causing little demand on the housing market. Those buying property from outside the province are generally focused on recreational property for seasonal use outside most urban communities, either along the coastal areas of the province or on its many lakes.
When you think of recreational property destinations in Nova Scotia, you tend to think of the North Shore, the South Shore, the Bras d’Or Lake or the (Annapolis) Valley.
Non-resident property owners are an easy target for tax increases because they have no say in the imposition of those tax increases. This is a perfect case of taxation without representation. While the government’s new tax levy is likely good politics, it is bad policy because it ignores the unintended consequences that are likely to result.
My own experience as the current president of the Marvins Island Owners’ Association underscores the value of non-residential property owners. The majority of property owners on Marvins Island are seasonal. Only about 10 per cent are owned by those from outside the province, a mix of Canadians and Americans. Most use their properties for four to six months of the year, but contribute through their property taxes to year-round municipal services that they themselves do not use when not here.
One could argue that non-residential property owners are already paying a premium on their property taxes based on the actual cost to municipalities for the services they use, and subsidizing the services of permanent residents.
The deed transfer tax of five per cent is much easier to accept than the two per cent tax on property value because those non-residents who currently own property in the province will not be impacted by this tax. While the increase in the deed tax will most likely discourage some from buying property in Nova Scotia, it is unlikely that this measure will have a significant impact on either the availability or affordability of housing.
The increase in property taxes is another matter. Most property owners in Nova Scotia pay about one per cent of their assessed value in property taxes. Is it fair to double the rate of property taxes for non-residential owners given what they contribute to the province?
Let’s talk about the contributions of non-residential property owners, especially to smaller rural communities across the province. The economic value of these property owners is considerable when you think about the goods and services that they purchase in the communities where they reside. That includes building contractors, property management companies, retail outlets and professional services.
Forgotten but equally important are the contributions these owners make to the communities in terms of their voluntary time and philanthropic support.
Here are a few examples. The Lunenburg Doc Festival was co-founded by two individuals originally from Toronto who have resided in Blue Rocks for more than 20 years. They are in the process of becoming permanent residents and have recently had other family members, including their grandson, move to the province.
A couple from Arizona have been residents of Lunenburg for more than 20 years and recently developed housing units in town to support the activities of the Lunenburg Academy. The new health facility in Chester received considerable financial support from non-residential owners, as did the Chester Playhouse.
On Marvins Island, an owner from Ontario has led our efforts over much of the last two decades to revitalize our forest lands and forest management practices using his professional background as a forester.
In each case, the community benefited from these non-resident property owners.
One other point worth noting is the value of these non-resident owners as brand ambassadors to Nova Scotia. The reputation of the province as a place to visit, live and invest in benefits from these owners. The reputational harm to Nova Scotia as a welcoming place as a result of this new tax levy is real.
The province needs to reconsider its punitive property tax levy on non-resident property owners or, at the very least, substantially decrease the rate. We do not want to encourage those who have contributed so much to the province to leave do we?
The province could consider a more targeted approach to the levy in those communities under the greatest housing shortage, which in reality is Halifax and surrounding communities. The current policy will disproportionately hurt rural communities otherwise.
In the end, the issue about housing availability and affordability is all about supply. Halifax is targeting 6,000 new housing units in the coming year. It will take some time for supply to catch up to demand in Halifax. We should not harm our non-resident property owners in the meantime.
