At the end of March, Finance Minister Allan MacMaster released Nova Scotia’s 2022-2023 budget. As part of the budget, the province has introduced two new taxes that target property owners who live outside of Nova Scotia: a Property Tax and a Deed Transfer Tax. Both taxes took effect on April 1.
The Property Tax requires non-resident owners to pay an annual $2 per $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 a residential property, including vacant land classified as residential, to pay a five per cent tax on the property’s purchase price or assessed value (whichever’s greater). Non-residents are exempt from this tax if they permanently move to the property within six months of purchasing.
The Nova Scotian government estimates that the two new taxes will generate $81 million of revenue in the 2022-2023 fiscal year. The earnings will be used to combat the housing crisis that’s plagued the province for the last three years. The price of properties and rent have skyrocketed in Nova Scotia, particularly around the Halifax area, and affordable housing is in short supply.
In October 2021, Halifax’s vacancy rate dropped to one per cent, according to the Canada Mortgage and Housing Corporation, tying the area with Victoria, B.C., and Peterborough Ont. for the lowest vacancy rates in Canada. Halifax’s vacancy rate first hit one per cent in 2019, the area’s lowest reported rate in the past 30 years.
In part, the government holds the high percentage of non-resident property owners in the province accountable for the low vacancy rate.
In 2020, 3.6 per cent of Nova Scotia’s residential properties were owned by non-residents, a higher percentage than both Ontario and British Columbia. Nova Scotia’s Finance Department estimates that around 27,000 of the province’s residential properties are owned by non-residents, with 52 per cent of those owners coming from Ontario.
The government theorizes that the new taxes will convince the province’s non-resident property owners to sell or rent their properties to Nova Scotians, opening up more affordable housing. The majority of people impacted by the new taxes, however, will be out-of-province cottage owners.
“Nova Scotia has a lot of people that come back because the cottage has been in the family for two or three generations, and it just happens that the children have moved to different provinces, but they still consider [the cottage] as going home,” said John MacKay, owner and broker of MacKay Real Estate. “They keep the cottage because it’s a great place to get together with family, cousins, relatives, and things like that. And now you’re doubling or tripling the taxes. People are going to question that.”
In a letter opposing the new taxes, real estate agent Stan Rose wrote: “Non-residents are not covered under Nova Scotia health plans and have to pay for any and all medical expenses. They are not a drag on our welfare system. They have no kids in school and most of them are only here from late spring to early fall. I don’t think any are in our prison system. They only use our roads during the period they’re here, and that doesn’t contribute to the damage done in the winter season.
“Actual benefits to Nova Scotia: They buy land and build expensive houses and then are taxed accordingly. They hire carpenters, roofers, painters, plumbers, and other tradespeople. They buy furniture, cars, trucks, trailers, boats, build wharves, buy clothes, food, alcohol, and oil, and support local restaurants and tourism events. They pay HST on most of these items and do not get any back. Looks to me like we already have a win-win situation. Why mess it up?”
Both Rose and MacKay are concerned that the non-resident taxes will deter out-of-province buyers from purchasing property in Nova Scotia and convince cottage owners to sell, impacting the province’s economy. It’s unfortunate, MacKay said, as he sees the demand driving the housing and apartment shortage in Nova Scotia as separate from the demand driving the cottage market. “The two are apples and oranges.”
With the ability to work from home, there’s been more demand for people to get out of their rental accommodations and buy a house, which is driving the housing shortage, MacKay said. Whereas cottage demand is being driven by people who’ve decided not to vacation internationally due to the pandemic and are instead looking for a domestic retreat.
Regardless, the government has moved forward with the taxes, and, in its 2022-2023 budget, has devoted $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 province’s legislature.