Commentary

Double Tax On Property Owners Is Stifling Development In Saint John

Apartment buildings on Queen Square in Saint John. Image: iStock.

Andrew Costin is a corporate and commercial lawyer with Gorman Nason and board chair of Uptown Saint John. He is also running for a Ward 3 seat on Saint John Common Council in a byelection May 6.

We are seeing encouraging development in Saint John. Entrepreneurs of all backgrounds are making major investments in our city. These people are taking risks and putting their own assets on the line every day. They are passionate about growing their businesses and growing our city. This includes the many social entrepreneurs improving conditions in our priority neighbourhoods.

My assessment: Our high property taxes are stifling growth.

There are two items: the high municipal tax rate and the provincial “double tax.” The provincial “double tax” on property is one of the primary impediments to growth in our city. This double tax, in combination with the highest municipal rate in the province, has a chilling effect on local investment and growth.

Saint John residents and businesses paid over $45-million in double tax to the province in 2016. The city government got a fraction of this money back; the rest was spent elsewhere in the province. Shouldn’t our tax dollars remain in our city? In Saint John, we have the pain of high taxes without the corresponding resources.

The “double tax” is marketed as a “Residential Property Tax Credit.” On your residence, you get a “credit” meaning you only pay the municipality, not the province. Any property you own that isn’t your principal residence is assessed at the higher “non-resident” double tax rate.

This can be a vacant piece of property, any portion of your property that is not owner-occupied (if you live in a multi-unit) and virtually any property owned for business purposes. This tax grab punishes “non-resident” property owners for not “residing” in all of their buildings — a clear disincentive to development. “Non-resident” is also a misleading designation: many of these “non-resident owners” are valuable residents — businesspeople living and investing in our city.

Entrepreneurs should be celebrated for fostering growth—not hit with an extra tax. This is why developers gravitate toward Halifax over Saint John. New Brunswick is the only province in Canada with the double tax. Halifax doesn’t have this extra tax—and Halifax is growing.

Halifax and Saint John were on equal footing, in many respects, before the double tax was introduced. Our province has been in a troubling state of decline since the double tax was introduced in the 1960s. In 2018, New Brunswick had the lowest growth in the country, while Saint John was one of only a few cities in Canada to post a population loss in the 2016 census. Our oppressive property tax regime is a major part of the problem.

When potential investors ask me why boarded-up buildings sit vacant all over town, there is a clear answer: high property taxes. Once they calculate the tax bill, (cross-referencing with the potential rent roll, the median income, and the strength of the rental market), the numbers don’t add up. Too many people decide against investing. Those who stay often look to develop outside our city limits, where municipal rates aren’t as high.

High taxes are passed down to the consumer. This is why clean, safe, affordable rental units aren’t available. The double tax stifles both owners and renters, keeping decent mid-range housing out of reach. Try to find a clean, safe, apartment uptown on Kijiji for a reasonable price. You likely won’t find much out there. The development we are seeing uptown is largely higher-end. In order to get a decent return, you have to rent Saint John units at bigger city rates.

We don’t want to see mass gentrification; we want to see balance in our growth. We need more clean, safe, affordable housing in our market — more middle-range supply. This is especially true of our priority neighbourhoods. There are hundreds of vacant buildings all over the city. We need to make it possible for investors (public/private/not-for-profit) to rehabilitate these structures. Eliminating the double tax will make it feasible for developers, for individuals, and for not-for-profits to purchase and remediate these neglected assets.

Successive governments have balked at ending the double tax. Revenue dependence is not a valid reason for the continued implementation of a destructive, anti-growth taxation regime. This outdated tax structure should be replaced by a healthier equation.

Eliminating the double tax will instantly spur investment. More people will enter this market, more people will be living in our city — more people will be putting these distressed assets, these neglected Saint John buildings, back to work. Increased investment will boost HST revenues, expand our tax base, and bolster our local economy.

Some argue that with the elimination of the double tax, the landlord is going to pocket the difference. A better investment climate will mean more development, which means a greater supply of units. Greater supply creates more competition — driving rental rates down. Landlords who pocket the tax savings and keep their rents high will not be competitive.

I want to see Saint John reach its full potential. We need to foster the best possible environment for development; we want our city to thrive and grow. Imagine if we had a tax regime that actually encouraged growth.  Admittedly, the double tax would be hard for the government to eliminate overnight.

It could, however, be phased out over a multi-year period. The loss of government revenues would be supplemented by increased HST revenues, a growing tax base, and a stronger, healthier economy.

This would be a welcome signal to property owners, to taxpayers, to investors, to developers, and to renters: We are getting rid of this embarrassing double tax, and we are finally open for business.

Huddle publishes commentaries from groups and individuals on important business issues facing the Maritimes. These commentaries do not necessarily reflect the opinion of Huddle. To submit a commentary for consideration, contact editor Mark Leger: [email protected]