Cutting the double tax on rental properties was the right thing to do

I know some people are annoyed about this and think that the developers are just going to pocket the money.

Here’s the bottom line.  New Brunswick brought in 6,000 immigrants last year.  I am convinced we will push through 10,000 per year within the next 4-5 years as boomers retire and job vacancies increase.

These newcomers – just off the plane – don’t want to buy a house right away they want to rent. This makes perfect sense.  However, the tax system discouraged this development.

Further, we are attracting more international students – and again I hope to double or more the number studying in New Brunswick over the next 4-5 years. This generates significant economic value for the province while they are studying and provides a pool of labour – here – on the ground – for employers when they graduate.  Where do you expect them to live while they are here? You want them to buy a big house?

This applies to large cities and small towns.  Hundreds of people living in the Woodstock area will be retiring over the next decade.  They are retiring, not dying (or leaving).  That means the town will need new housing to accommodate the folks who will be moving in to replace the retirees in the workforce.  Of course some people will actually die each year but most boomers are many years away from this.

The proof will be in the pudding.  If we see an appropriate number of rental units springing up around the province at decent rents (that no more than 30% of household income spent on shelter is still the important metric here), then the tax reform will have been worth it.

2 thoughts on “Cutting the double tax on rental properties was the right thing to do

  1. you are an economist David, what happens with monopolistic competition if you give some of the social surplus that was captured by taxes to the producers? do they produce more, do they invest, do they change their behaviour in any way? I feel like the already existing research on this area could possibly inform us without having to do a social experiment. And remember that “discourage” implies that it actually factors into the development decisions of market participants but the decision to build and the decision to manage into the long run are separate. What is the counter factual you plan to use in your analysis? more units in future periods compared to previous ones? how do you account for now being a low vacancy rate period compared to before when it was a high vacancy rate period? How do you account for changes at the PAC’s around the province? how do you account for the change in consumer preferences? how do you account for the change in developers outlook of rental growth? Cause all of those things are more significant in developers behaviour than the tax rate they face.

  2. I assume the provincial government has analyzed this but my general view is that if we don’t see growth in reasonably priced rental units the government could revisit the change. It is meant to change things, if it doesn’t, the tax could be reimposed.

Comments are closed.