Landlord Association Says Rising Assessments And ‘Double Tax’ Will Fuel Rent Spikes
FREDERICTON – New Brunswick’s largest landlord group says the province’s so-called ‘double tax’ on rental properties could be the catalyst to rent spikes as high as $500 to $700 per year if something isn’t done.
Willy Scholten is the chair of the New Brunswick Apartment Owners Association (NBAOA). He says New Brunswick’s ‘double-tax’ will fuel rent spikes because many apartment buildings are seeing their assessed value spike by as much as 20 percent.
“I think they need to finally get rid of the double tax,” Scholten said. “If you’re going to increase assessments you’ve got to take into account the ramifications of that.”
In New Brunswick, non-owner-occupied buildings are charged taxes by both the province and the municipality. That ‘double tax’ stands in contrast to owner-occupied properties, which are only taxed by the municipality and not the province.
Scholten, a chartered accountant and CFO for Fredericton-based construction and property management company Colpitts Developments, said the ‘double tax’ has been an issue for the NBAOA for a long time.
He stressed that its impacts will hurt tenants, who can least afford it, the most. Scholten noted landlords small and large will have to pass on the price spikes to tenants if something isn’t done.
“It really comes back to the province and municipalities doing the right thing and trying to offset this and fix a system that’s been broken for years,” said Scholten.
In a Nov. 8 news release, the NBAOA proposed a phased approach to removing the ‘double tax,’ whereby the province eliminates 50 per cent of the tax now, offsetting the 20 per cent increase in assessment value for rental properties.
The body also recommends putting a formula in place that further eliminates more of the ‘double tax’ whenever assessments increase over time. This, the NBAOA said, will ensure municipalities receive the same tax revenue they’re collecting in 2021.
“The tenants don’t get hurt by it and landlords aren’t getting an additional tax so they don’t have to pass it on to tenants. It’s a win-win,” noted Scholten.
Scholten said rising assessment values alone are resulting in an average increase in property tax rates of seven percent. The NBAOA’s calculates that will trasnalte into 15-20 percent rent spikes. This comes at a time when insurance premiums are also increasing on apartment buildings, by up to 20 and 30 percent on average.
“Between that, the lack of supply, the high costs of building materials and maintenance, there are a lot of costs landlords are dealing with,” he said. “Insurance, too, is absolutely driving that up, but property taxes are the biggest item. There’s nothing close to that.”
Scholten urged the provincial government and municipalities across New Brunswick to act quickly to address the problem. He noted that New Brunswick is the only Canadian province to have a ‘double tax,’ which makes property taxes on apartment buildings 251 per cent higher, on average, than the rest of Canada.
Of the 4,200 rental properties in New Brunswick, Scholten said 1,100 have not yet been assessed. He said those that have already been assessed are showing a worrying trend.
He said the price increases will start showing up on the rental side in January or February of 2022, on account of the six months’ notice landlords are required to provide before they change rent in New Brunswick.
“It’s really hard to look at the rental rates you have to charge, knowing where property taxes are going to be at,” Scholten said.
Scholten noted property taxes, on average, constitute about 35 to 40 per cent of the costs of being a landlord – the largest expense for apartment owners in the province.
Information released from the NBAOA says two months of each tenant’s rent goes toward covering the cost of property tax.
The NBAOA stressed that the rent increase resulting from rising assessment values will lead to no financial benefit for landlords, alleging that the province and municipal governments are the only ones poised to benefit.
“Knowing it’s going up 20 per cent, it’s just kind of unbelievable what’s happening,” he said.
Sam Macdonald is a Huddle reporter in Moncton. Send him your feedback and story ideas: [email protected].