In late March, Finance Minister Allan MacMaster released Nova Scotia’s 2022-23 budget. As part of the budget, the province introduced two new taxes that target homeowners who live outside of Nova Scotia: a property tax and a deed transfer tax. Both taxes went into effect on April 1.
Property tax requires non-resident property owners to pay $2 annually for every $100 of the property’s assessed value, as determined by the Property Valuation Services Corporation. Non-residents who rent their properties to Nova Scotians are exempt from this tax.
The deed transfer tax requires any non-resident purchasing residential property, including vacant land classified as residential, to pay a 5% tax on the purchase price or assessed value of the property (depending on the highest value). Non-residents are exempt from this tax if they permanently move into the property within six months of purchase.
The Nova Scotia government estimates the two new taxes will generate $81 million in revenue in the 2022-23 fiscal year. The proceeds will be used to address the housing crisis that has plagued the province for three years. Property prices and rents have skyrocketed in Nova Scotia, particularly in the Halifax area, and affordable housing is in short supply.
In October 2021, Halifax’s vacancy rate fell to 1%, according to the Canada Mortgage and Housing Corporation, which ties the region to Victoria, British Columbia, and Peterborough, Ontario. for the lowest vacancy rates in Canada. Halifax’s vacancy rate hit 1% for the first time in 2019, the lowest rate for the region in 30 years.
In part, the government blames the province’s high percentage of non-resident homeowners for the low vacancy rate.
In 2020, 3.6% of residential properties in Nova Scotia were owned by non-residents, a higher percentage than in Ontario and British Columbia. The Nova Scotia Department of Finance estimates that approximately 27,000 residential properties in the province are owned by non-residents, 52% of which are from Ontario.
The government is speculating that the new taxes will convince non-resident homeowners in the province to sell or rent their properties to Nova Scotians, opening up more affordable housing. However, the majority of those affected by the new taxes will be out-of-province cottagers.
“There are a lot of people in Nova Scotia who come back because the cottage has been in the family for two or three generations, and the kids happen to have moved to different provinces, but they still consider [the cottage] like coming home,” said John MacKay, owner and broker of MacKay Real Estate. “They keep the cabin because it’s a great place to get together with family, cousins, relatives and things like that. And now you double or triple the taxes. People will question that. »
In a letter opposing the new taxes, real estate agent Stan Rose wrote: ‘Non-residents are not covered by Nova Scotia health plans and must pay all medical expenses. They are not a drag on our welfare system. They have no children in school and most of them are only here from late spring to early fall. I don’t think there are any in our prison system. They only use our roads during the period they are here, and this does not contribute to the damage caused during the winter season.
“Real benefits to Nova Scotia: they buy land and build expensive homes, then taxed accordingly. They hire carpenters, roofers, painters, plumbers and other trades people. They buy furniture, cars, trucks, trailers, boats, build docks, buy clothes, food, liquor and oil, and support local restaurants and tourist events. They pay the HST on most of these items and receive no refund. It seems to me that we already have a win-win situation. Why mess it all up?
Rose and MacKay are concerned that non-resident taxes will deter out-of-province buyers from buying property in Nova Scotia and convince cottagers to sell, which will impact the economy of Nova Scotia. province. That’s unfortunate, MacKay said, because he sees the demand driving Nova Scotia’s housing and apartment shortage as separate from the demand driving the cottage market. “Both are apples and oranges.”
With the ability to work from home, there have been more demands for people to move out of their rental accommodation and buy a home, which is driving the housing shortage, MacKay said. While demand for cottages is being boosted by people who have decided not to vacation abroad due to the pandemic and are instead looking for a domestic retreat.
Either way, the government forged ahead with taxes and in its 2022-23 budget committed $15 million to affordable housing programs.
“We will do what needs to be done to make sure Nova Scotians can afford a place to call home,” MacMaster told the provincial legislature.