Did you know that the property tax rate for people living in apartments in New Brunswick is 89% higher than for people living in their own homes?

If you are an apartment dweller, you may not be aware of this because the tax is charged to the registered apartment owner and then passed on to you in the form of rent. Sometimes the tax is not passed on to tenants because of competitive market pressures.

When the owners bear the tax burden, the tenant pays the piper.

Fewer rent dollars mean fewer dollars for maintenance and fewer dollars for apartment improvements like appliances, new windows, new counter-tops, new carpeting, painting or other things that improve the quality of life for an apartment resident.

In New Brunswick, property taxes paid by apartment owners equal or exceed all their other operating costs, except debt-service. It’s been estimated that apartment resident in the Province pay on average $55 a month more in property taxes than in Nova Scotia, $47 a month more than in Prince Edward Island and $65 a month more than in Newfoundland.

The single family home-owner in New Brunswick pays $1.69 per $100 of assessed value in property taxes. Apartment residents pay (directly or indirectly) $3.19 per $100 of assessed value as do cottage owners.

In other Atlantic provinces, the single family home rate is exactly the same as the apartment rate.

Here’s the reason for difference.

In New Brunswick, single family home owners pay a municipal property tax but apartment dwellers pay the municipal property tax plus a provincial property tax. They pay it in the form of higher rents. Most provinces in Canada, including the other three Atlantic provinces do not charge provincial property taxes.

Where is the logic in a tax that targets medium and fixed income people in apartments but exempts those who can afford to buy a house?

The Government’s “Prosperity Plan” promises competitive levels of taxation to encourage economic development. It advocates youth and labour retention. It promotes the patriation of former residents. If successful, the Government’s plan will create demand for housing and apartment rentals. We can’t afford to penalize new residents, some of whom will be apartment renters, with an unfair property tax.

So, what can we do about it?

I’m told the Government collects about $40 million a year in rental property tax. If it removes the tax, who picks up the slack? Who or what else would the government have to tax to make up for the revenue loss?

If the provincial property tax should be lifted from apartments and the monies flowed to tenants, their disposable incomes would increase and their spending power would increase but the tax generated by their spending would generate less revenue for the provincial government than the current provincial property tax.

On the other hand, if the tax remained in the hands of the apartment owners and the owners invested the tax-savings in building and apartment improvements, tax revenues for the province could be much higher. Here’s how it could happen!

A modest economic multiplier of 2.5 applied to a $40 million investment in renovations or building improvements would convert to $100 million in economic activity. That would mean jobs and the purchase of goods and services. It would also mean income, sales and gasoline tax revenue.

Now, here is the hole in this logic; what happens to the $40 million if it all settles in the landlord’s pocket?

Worst case scenario; landlords would pay income tax on the windfall and some of the money would return to the provincial government. A more realistic scenario would see tenants exercising their muscle by moving out of buildings where tax-removal did not result in lower rents or improvements to their living quarters. Vacant apartments would cost landlords big-time money.

There are about 63,000 apartment residents in New Brunswick. My estimate is that they pay an average of $635 a year in provincial property tax, on top of their municipal property tax.

Some argue that fewer apartment buildings are being built because of that tax. Others are convinced that maintenance and property upgrades are left behind because the provincial property tax-burden is being absorbed by landlords.

You might ask why this is a problem.

Do the math. Rental property assessments have increased by about two thirds in the last couple of years. When the assessment goes up, the tax goes up, even though the tax-rate remains the same. If the assessed value of a rental space increases by two thirds, the property-tax payable on that value increases by $2.10 per $100 of value.

Market value is a function of demand. When values go up it’s because people are willing to pay more than the going rate for a property.

In Moncton, a combination of housing demand and an influx of property managers like Killam, who are flush with outside investor funds are acquiring local rental properties at premium prices and pushing up their market value. Tenants ultimately bear the cost in higher property taxes and/or higher rents.

In 1967, the Government of New Brunswick took responsibility for health, education, social services and the administration of justice to ensure equal access to these services for all residents. The cost was transferred from counties and municipalities to the Province.

Funding was generated from market-valued provincial property taxes. The Province has since devolved much of the property tax field to municipalities.

Today’s issue is not with market value assessment or with municipal property taxes; it is with a provincial property tax that is indiscriminately applied on top of a municipal tax paid by apartment-residents.

It’s a double tax and it’s wrong-headed.