A Collective Call to Action
On May 7th, the Chambers of Commerce of Fredericton, Greater Moncton, and the Saint John Region delivered a letter to Premier Higgs to address the critical issue of housing in our province. Specifically, we reaffirmed the immediate need for housing options in our communities and the necessary actions to create conditions conducive to increased development.
Like many provinces across Canada, New Brunswick is grappling with a housing crisis, characterized by a severe shortage of available housing units. As noted in the Fredericton Chamber of Commerce’s response to the recent provincial budget, the additional funding provided to the New Brunswick Housing Corporation – $68.9 million (housing strategy) – was a good start, but as there were no actions to implement property tax reforms or offsets for construction of new rental housing, we decided it imperative to once again present actions that will incentivize the immediate and long-term housing developments required for sustainable population growth in our province.
An immediate action available to the provincial government has been removing the provincial portion of HST on new purpose-built multi-unit dwellings. Simply speaking, we have fallen behind the actions of other levels of government and especially other provinces. It has been since September 14, 2023 when the federal government announced relief for the Goods and Services Tax (GST) on the construction of purpose-built rental housing and strongly encouraged provinces to do the same concerning their portion – a position with which we agree. We recognize that the government has taken the perspective that such a move is not worth the hit to the province’s bottom line, but when one considers that any potential revenue for the province is directly transferred as a burden to developers and ultimately tenants, we view this as a direct investment opportunity. Nova Scotia announced the elimination of the provincial portion of HST on new apartment construction that very same September, along with provinces to follow including Ontario, Prince Edward Island and Newfoundland and Labrador. Compounding this issue, the New Brunswick Apartment Owners Association reports that the property tax rate for non-owner-occupied properties (i.e. rental properties) is 1.4X higher than the other Atlantic Province’s average due to remaining elements of double taxation. As a chamber of commerce, we are acutely aware of the effects of government debt, but in some cases, as in business – a short-term investment is worth long-term gain.
Another immediate action urgently required concerns the anticipated spike in residential rental property costs in 2025. Since 2022, the Province of New Brunswick has provided “property tax relief for owners of eligible residential rental properties”. This spike protection mechanism applying to an assessment increase greater than 10 per cent mirrored the existing spike protection mechanism for homeowners. This was extended in October of 2023 to include the 2024 taxation year at which time it was also announced that beginning “in the 2025 taxation year, annual property assessment increases would be limited to 10 per cent on all eligible properties.” Specific to rental properties, a critical gap in the intended protections between the previous temporary measure and the new permanent legislation exists when a pause in the spike protection is expected next year. This legislation will not take effect before the total outstanding assessed increase gets lumped into apartment owners’ 2025 bills. This gap in the intended protections represents a negative message to current landlords and developers who are now bracing for an exponential rise in property taxes.
As recent as April 2024, Service New Brunswick has confirmed that “a gap in spike protection for landlords would be happening in 2025” and that the “Department of Finance and Treasury Board are reviewing the details of their questions.” This analysis must be completed as soon as possible and ensure a seamless transition between the temporary spike protection and the new legislation. In the unfortunate event this gap be left unchecked, the province must fulfill its announced commitment to eliminate previously identified taxes, such as the double tax, to improve the 2024 full assessment of which 2025 spike protection will be based. Any measures of inaction regarding this acknowledge legislation gap and the continuation of the double taxation ultimately deters development of rental properties in New Brunswick which directly infringes upon the capacity of our provincial housing stock and ultimately imposes increased burdens on our current renters and homeowners. It is also critical that once permanent spike protection is in place that governments at all levels do not view an annual 10% in property tax bills as an acceptable new normal – businesses and residents alike are already being stretched to their limits on this key cost.
In Premier Blaine Higgs’s speech at the 2024 State of the Province hosted by the Fredericton Chamber of Commerce, he reaffirmed the government’s goal of limiting annual rent increases to below 2.5 per cent, achieved indirectly through market forces, by encouraging the construction of more housing. We support this goal but must make extremely clear that the market forces required to achieve this goal necessitates the very actions pointed out in our letter. It is a fundamental part of the process to enact the measures necessary to achieve this goal to help enhance and promote the livability of our communities by investing in New Brunswick.
Lagging Behind the Field
Shortly after the delivery and release of our letter, a news article authored by Robert Jones, entitled “Housing starts in New Brunswick lagging further behind Maritime neighbours in early 2024”, confirmed that Housing starts in New Brunswick were falling further behind our Maritime neighbours in early 2024.
This news further paints a clear picture that New Brunswick has missed the mark for new housing starts in 2023. Facing this obvious barrier to achieving goals, the government says it is still not interested in cutting sales taxes on new apartment builds in 2024, despite evidence suggesting that provinces that have tried the idea experienced a surge in new construction.
Figures show Prince Edward Island and Nova Scotia saw construction starts on new apartments at a rate three times higher than New Brunswick during the first three months of 2024, after they moved to lower construction costs by cutting taxes. Despite repeated calls, including our 2024 pre-budget submission, Finance Minister Ernie Steeves has rejected the federal idea as too expensive. Nova Scotia’s Premier Houston has noted similar concerns and has acknowledged the initiative could cost Nova Scotia up to $100 million in reduced sales tax per year, but he has also added that this cost was not a deterrent.
As reported in Jones’s article, CMHC data released in April makes the urgency to act very clear. Apartment units that began construction in Nova Scotia totalled 1,735 during the first three months of 2024 under the new tax rules, with an additional 287 started in Prince Edward Island. It is a rate of new apartment starts of just above 162 units per 100,000 population, in each province, for the three-month period. That is triple the number in New Brunswick, which recorded 467 new apartment units starting construction, a rate of 55 per 100,000 population.
For New Brunswick, these numbers are the equivalent of 900 fewer apartment units beginning construction during the first three months of 2024 than if it had been able to match rates in the other two provinces.
Only days after the Chambers of Commerce of Fredericton, Greater Moncton and Saint John issued a united call for the government to act on obvious measures to keep pace with our fellow provinces, we were again reminded that not only are we lagging behind the development occurring in these provinces, but in the eyes of developers, we are not even on the same field.
Get in the Game
On May 8th following the release of our joint letter, I appeared on the CTV News at Six with Todd Battis. During the interview he asked me if this was a housing crisis or housing failure? I responded that we’re obviously in a housing crisis across our country, but the key was that we get in the game. From both objective data and obvious subjective observations, this is the urgent realization growing in our province, we are at a tipping point in our growth and to prevent this period becoming a failure, we must get in the game.
In my commentaries over the last several months, whether concerning the issues of health care, education, or the provincial budget, I have repeatedly noted that as a province we are living in a period of long sought after growth and we must recognize that without the proper actions, the problems of growth can quickly shift back to the realities of decline. As the Fredericton Chamber stated in our post budget response, “we can no longer be satisfied with the achievement of facing the problems of growth instead of decline. It is critical that we change our course of action to address and actively manage these real and immediate problems of growth. Inaction only serves to send a message of negativity to those living and investing in New Brunswick now and removes us from any competition for future investments and newcomers seeking to add to our growth.” The repeated call to the province by the Fredericton Chamber of Commerce across these issue areas is one of “Action” and “Alignment” towards our obvious goals, or to put it more clearly once again, we have to get in the game to achieve our goals!
When the goals are obvious and agreed upon, when the standard has been set by the field, we know the game and the action is what counts. As the Premier himself declared in his State of the Province speech, “Ensuring New Brunswickers can live in comfort in our province is crucial to our overall growth and well-being”. We agree, and this is why the collective chambers presented the immediate actions required to regain a competitive balance with our neighbouring provinces by creating an eco-system conducive to urgently needed development.
