N.B. government sacrifices little revenue with rental property tax cuts

Detailed property-by-property figures show tax bills facing New Brunswick landlords this year will mostly be going up, not down, despite a significant tax rate reduction announced last week by Finance Minister Ernie Steeves and additional tax cuts being implementedby municipal governments.

Large assessment increases on rental properties are more than offsetting tax reductions in many cases, confirming claims by landlords they will pay more and undermining suggestions by the province that it is giving up substantial revenues by lowering tax rates on apartment buildings.

"There's a misconception right now from the tagline that the government has put out there that landlords are getting savings,"Willy Scholten of the New Brunswick Apartment Owners Association said in response to the province's budget.

"It has been completely misrepresented that there will be savings to landlords. The people of New Brunswick should understandthat."

Last week, New Brunswick Finance Minister Ernie Steeves laid out a plan for a series of tax cuts on various property categories over three years that he said would eventually "reduce provincial property tax revenue" by $112 million per year.

According to Department of Finance estimates, tax cuts on apartment buildings will account for about $50 million of that $112 million amount.

The plan for apartment buildings is to cut the province's current 1.1233 per cent tax rate in half over 36 months with one third of that reduction implemented this year.

But in 2022, figures show, this will not be enough to keep property taxbills on hundreds of rental properties from increasing.

On Fredericton's Boyne Court, the 101-unit apartment building known as the Plaza was issued a combined municipal and provincial property tax bill in 2021 of $417,688. In 2022 , after tax-rate cuts by both the city and the province, that bill is increasing by more than $48,000.

Much of the increase is going to the City of Fredericton, but about $3,200 of it is caused byhighercharges from the province. That's because the Plaza received a 21.7 per cent increase in its property assessment this year, generatinga higher property tax bill despite the lower tax rates.

"There's no cut," Scholtensaid in his response to the budget.

"There are two parts to property taxes. There are tax rates, and there are assessments,and the two get multiplied together."

In Fredericton, the combined size of tax rate cuts being implemented by the city and province mean any apartment building with an assessment increase above nine per cent for 2022 will face a higher property tax bill than in 2021.And the vast majority of rental properties in Fredericton had assessment increasesabove that threshold.

According to data compiled for CBC News by the websitepropertize.caon 709 properties in Fredericton with at least one rental unit, 667, or 94 per cent, have assessment increases of nine per cent or more this year and will have higher property tax bills as a result.

More than 400 of the buildings, including the Plaza, have assessment increases of 20 per cent or more.

It is similar in other New Brunswick municipalities, with slight variations caused by different property-tax-rate cuts being implemented in each.

In Saint John, apartment buildings with assessment increases above 10 per cent will see higher property tax bills than last year, and in Moncton it will be rental propertieswith assessments above 12 per cent.

It's never been a housing market like this in New Brunswick, so you do the bestyou can.- Ernie Steeves, New Brunswick finance minister

LikeFredericton, each community has several hundred rental propertiesabove those levels.

New Brunswick's largest landlord is Killam Apartment Real Estate Investment Trust.It owns one in every seven private market apartments in the province, including more than 1,000 each in Saint John and Fredericton and more than 2,000 in Moncton.

In its latest annual report, Killam said the average assessment increase on its 77 New Brunswick properties for 2022 is 23 per cent.

That would increase Killam's overall property tax bill, including the amount it pays in property taxto the provincial government.

That undermines messaging from the province that it is reducing its revenue from property taxes on apartment buildings by up to $20 million in the current fiscal year.

Budget documentsshow overall provincial property tax revenue is expected to fall by less than one per cent this year, despite all of the rate cuts, suggesting increased assessments will help keep bills elevated.

The morning after his budget speech, Steeves suggested that even if elevated assessments have offset the effect of property tax cuts for landlords, there are two more rounds of reductions to come and apartment owners should see savings eventually.

"I think in three years they will like it," said Steeves.

"Right now itsan odd time.It's never been a housing market like this in New Brunswick, so you do the bestyou can."