https://www.thestar.com/news/canada/2022/05/05/to-solve-a-housing-crisis-nova-scotia-taxed-out-of-province-home-buyers-it-didnt-work.html

HALIFAX—A humbled Nova Scotia government scrapped a controversial property tax on non-resident owners Thursday, saying it was the wrong tool for the housing crisis job.

And while that decision might bring a sigh of relief to out-of-province owners who, in some cases, were looking at seeing their property taxes more than double, the government’ backtracking wil do nothing to calm the nerves of those seeking affordable housing in a province where more and more residents are finding the cost of a home to be out of their reach.

“Today I’ll put my personal pride to the side,” said Premier Tim Houston told a news conference. “This policy was an effort to find a solution. It was always meant to be a tool to support housing. But when you realize that the tool you have in your hand might not get the job done, you look for another tool.

“I’ve heard for months from Nova Scotians who are concerned about housing affordability and want to buy their first home in the community they were raised in. My intentions all along were to improve home affordability, but that was never meant to be at odds with … the core value of our province, which is being more welcoming.”

It’s a familiar refrain across the country — locals unable to penetrate housing markets spiked by out-of-province — or out-of-country — buyers.

At the federal level, the government responded with a two-year ban on foreign buyers of Canadian homes. At the provincial level, British Columbia and Ontario have created taxes on foreign buyers to dissuade real-estate speculators. P.E.I. already has a property tax on non-residents in place and New Brunswick has a property tax on secondary residences.

In Nova Scotia, the property tax law was to have added another two per cent to the taxes on the assessed value of the residential properties of out-of-province owners. At the same time, the province levied a five per cent deed-transfer tax. That deed-transfer tax will stay in place.

For an out-of-province owner of a $400,000 house in the Halifax area, for example, that property tax increase could have meant paying more than double their current taxes — jumping from about $5,000 to about $13,000.

Critics of the tax, such as the Nova Scotia Association of Realtors (NSAR), had said that imposing the increased taxes on non-residents would not free up a meaningful housing supply or have a significant impact on the affordability of housing, and might, in fact, have negative consequences on the province’s economy.

Furthermore, they said, it ran contrary to the past several years of Nova Scotia working to attract people and business to the province.

Those efforts to boost Nova Scotia numbers had begun to bear fruit, with the province seeing a five per cent growth in population over the past five years, after remaining static for the previous five. Only three other provinces — Ontario, B.C. and P.E.I. — and Yukon showed bigger growth spurts.

With an increasing number of people coming to the province, the supply of available houses dwindled, causing a rise in housing and rental prices.

Exacerbating that situation, even more home buyers flooded to Nova Scotia during the COVID-19 pandemic, lured by the relative safety of Atlantic Canada, the increasing ability to do their work from home and the relative affordability of houses compared to Ontario, which — anecdotally, according to realtors — was the point of origin for the majority of those buyers.

That created a massive spike in the housing market, one which the province initially sought to mitigate with the non-resident property tax.

“It’s causing an emotional reaction,” says Matthew Dauphinee, president-elect of NSAR, in an interview less than an hour before the province backtracked on the tax. “Nova Scotians have always prided ourselves on having open arms … it’s like we’re not that welcoming place anymore.

“A lot of people are upset by it, and they want to fight it, to have it go away. That’s the ideal solution.”

Go away it did, but that still leaves the province with a lack of housing that its residents can actually afford.

Critics and proponents alike agreed that, rather than taxes, the housing crisis had to be addressed at a more foundational level — the lack of houses in the province’s inventory.

Before the tax was axed, Jim Graham, executive director of Affordable Housing Association of Nova Scotia, didn’t hold up much faith that it would create a greater housing supply, nor that it might prevent non-residents from scooping up what supply existed.

“If the plan was that somehow this would stop (non-resident) people from buying … if that was the intention, I don’t think that an extra tax would stop somebody from away with a lot of money actually buying the property.

“My intuition tells me there’s no difference between a half a million dollars and a half a million and $50,000 dollars to somebody that’s got a half a million dollars.”

But he had hoped — though it hadn’t been made clear by the province — that the money raised by those taxes would go into ways of funding affordable housing rather than the province’s general revenue.

Rather than the tax, there are two tools the province most needs to tackle the lack of supply, he said.

The first would be to provide land on long-term leases to developers committed to constructing affordable housing. And the second would be to create some capital for those developers dedicated to affordable housing, to put them on equal footing with those who are more profit oriented.

Like all markets, housing prices are driven by supply and demand. And the way to drive those prices down is to create an increased supply and, with it, a reduced demand.

And while non-resident property taxes create revenue, and may dissuade some non-residents from buying up the limited supply remaining, the ultimate solution is more straightforward, said Ben Myers, president of Bullpen Research and Consulting, a Toronto-based residential real estate advisory firm — build more houses.

“You can take a pizza and chop it up any number of different ways, but it’s still the same pizza,” he said.

What governments need to do in general, he said, is make it easier for developers to deliver a supply of houses.

And, he added, governments should be thinking about getting into the construction of affordable housing themselves, with the initial cost of building being offset by having to spend less on — for example — unemployment services, hospitals, shelters and addiction services.

“I always hear that it’s too expensive, that they can’t do it,” he said. “But I think if they went out and had this campaign of building affordable housing, I think it would save them so much more in other areas of their budget.”

Steve McKinley is a Halifax-based reporter for the Star. Follow him on Twitter: @smckinley1