Do New, Non-Resident Property Taxes ‘Close The Door’ To Nova Scotia?
HALIFAX—Last year, Troy and Karen Lowman bought 68 acres of land outside Digby, Nova Scotia. The newly retired South Carolina couple plan to build a home on the property so they can spend “as much time as possible” in a province they’ve come to love.
When they do, they’ll run up against a new tax that specifically targets people who buy property in Nova Scotia but don’t intend to live in the province full-time.
Earlier this week, the provincial government introduced two new property taxes for non-residents. The government says the taxes are one more tool in its toolbox to help increase housing availability.
When he learned about the new tax, Troy had a blunt assessment.
“I understand it. I don’t know if I like it, but I understand it,” he told Huddle in a phone interview.
But while he and Karen worry about what the extra cost will mean for them, they say the new tax won’t change their plans.
Their response would worry experts who are questioning how much practical effect the new taxes will have—and asking whether they are sending the wrong impression about investment in the province.
Taxes Target Non-Residents
The first of the taxes is a Non-Resident Deed Transfer Tax. It’s a five percent tax on the value of property bought by a non-resident.
According to the Nova Scotia Association of Realtors, the average home in the province sold for $422,100 in February. So, under the new tax, a non-resident would face an additional, one-time payment of more than $21,000.
The province estimates the deed transfer tax will affect about 3,200 property purchases in Nova Scotia each year.
However, it won’t apply to anyone who plans to move to Nova Scotia within six months of buying property here.
The second is a Non-Resident Property Tax. That’s a yearly charge of two percent of the value of any residential property owned by a non-resident.
For the average property in the province, that’s a tax of close to $8,500 each year.
The tax does come with exemptions for anyone who rents the property to a Nova Scotian on a full-time basis. It also doesn’t apply to residential properties with more than three units.
The province says about 27,000 properties in Nova Scotia (about 6.7 percent) are owned by people with mailing addresses outside the province.
Together, the two taxes are expected to bring in about $80-million a year. The government claims the taxes are not meant to generate revenue.
On March 28, Finance Minister Allan MacMaster told reporters he hoped the new taxes “will help people that are struggling to find a place to live.”
Charging extra tax to property owners that don’t live here can encourage them to rent their properties to Nova Scotians.
Target Supply, Not Demand
Matt Honsberger is the president of Royal LePage Atlantic. He says it’s a little too early to tell the full effect of the new taxes. But he doesn’t think their impact will be huge.
Since there are exemptions built in for people planning to move to the province, Honsberger says the tax will only affect a small fraction of buyers.
He says he understands the province wants to help people who feel priced out of the housing market but questions if trying to chill demand is the answer.
“I think we’ve spent the better part of, I don’t know, 100 years as a province trying to make ourselves attractive to the rest of the world,” he says. “All of a sudden we’ve become attractive to the rest of the world and it seems like we’re now trying to close the door.”
Honsberger believes most of the pressure on Nova Scotia’s housing market is coming from the lack of supply, so he was happy to see the province tackle supply issues in a big way.
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“But if you’re doing that and then also trying to tamp down demand a little bit, I think we have maybe overshot the mark a little,” he says.
He says there’s a good chance the new taxes will do little more than act as a “speedbump” for people already planning to buy seasonal properties here—making them feel less welcome while having little practical effect.
New Taxes ‘Annoying’ But Won’t Change Plans
The Lowmans are the exact type of buyers the new taxes target. They plan to spend half of every year in Nova Scotia but don’t want to give up their American citizenship because they would lose healthcare coverage and social security payments.
Troy says the new taxes will be a nuisance but likely won’t push them to rent out their home.
“I don’t think it will change anything we do, it will just cost us more money every year in taxes,” he says. “I think it’s just going to be more annoying. It won’t affect me financially too much.”
Both Troy and Karen say they understand charging extra tax to non-residents. They will be using services but not paying income tax in Nova Scotia so they feel like the extra tax is warranted (although that’s not the government’s intent with the taxes).
However, Karen admits another part of her feels unfairly targeted.
“I think there are so many ways to look at it. You can look at it like the government needs the money. Well, OK, but we’re coming up there and we want to spend money. We’re shopping there and we’re building our house there, we’ll be hiring people to do the work,” she says.
“We plan on spending a lot of money in Nova Scotia… that might not have gotten spent otherwise.”
Trevor Nichols is the associate editor of Huddle, based in Halifax. Send him your feedback and story ideas: [email protected].
April 5, 2022 @ 11:32 pm
The province is penalizing non residents of Nova Scotia who come here and build a house for themselves. Why?? The premier claims the reason for penalizing from aways is to increase the housing supply. Oh yes and to pay for everyone’s health care. $80 million you say. I built a house for myself here. I didn’t take from the existing housing stock. Although I intended to live here full time, I have not because the health care is strained to the limit. This is a typical punitive move from a culture steeped in the a dislike of from aways. It targets from aways. Residents of the province who own a second home should be treated the same way. If this government really wanted to increase housing supply, they would try to give incentives to non resident from aways to build rather than buy. Many already do. We pay taxes for a whole year and use services for 6 months a year. We pay the same sales tax as every one else but those of use who are non resident and reside outside of Canada don’t use the health care system here. This sales tax is so high in part to pay for the health care system. Implementing this drastic a measure full stop and not gradually is tantamount to a confiscation of house. If many house go on the market because of this measure, that is tantamount to a confiscation. It seem likely that this measure will put pressure on high valued properties. Who will buy these? Affluent Nova Scotians… who aren’t penalized for having a second home. Confiscation by the back door. I wonder if the governor of Florida will try this tactic on the so called snow birds. I think not because he would realize that part year residents give more than they take.
April 7, 2022 @ 1:09 pm
I am Canadian and my family and I have a cottage in Nova Scotia. We would love to be there full time but we are unable to get a doctor. I have some health conditions that require regular doctor visits and I have young children. At this point it would be risking our health to give up healthcare in the US, but the new premier is forcing me to choose between my heath and my love for my home. With this new tax we cannot afford both.
Just because you own a second home does not necessarily mean you are “rich”. The area that we are in are mostly uninsulated cottages from the 1930’s and the owners are schoolteachers, etc. Many of which left NS to find jobs. If they are forced to sell the family cottage which they have been coming to their whole lives, because they can’t afford the tax, their cottage will be bought by a rich person who will tear it down to build something massive. Effectively pushing the property values up even higher (making the problem worse) and destroying the vernacular architecture of the area.
Please consider that there are many different scenarios, this is not binary. This issue is much more complicated. We are there six months of the year, we are a part of the community, and we pump money into the local economy. My family is originally from Nfld. so I have a stake in what happens to the culture of the east coast. This new tax will damage the local culture irreparably.