Jun 5, 20213 min read

Double Taxation Myth: Buying Rentals in New Brunswick

Updated: Sep 2, 2021

Good evening,

This blog post is dedicated to clearing up some of the clumsy wording and other elements found in New Brunswick that can clearly through people off and perpetuate an "us versus them" mentality that I do not believe has ever served this province. So, here is a start:

Double Taxation

The government has been dragged through the dirt on the position that it is unfair to double the taxation rate for rentals where the homeowner does not live. This has fueled arguments for why rent increases, blaming the government. It has been bugging me for a while and I figured that had to be a reason. Sure enough, here is something interesting...

I took a look at a few other systems such as Ontario where taxes have a municipal rate, an education rate and then takes into account property value. Then in unincorporated areas, another jurisdiction takes over. The commonality between all of then is that here is a tiered taxation system, just like in New Brunswick. Some are more complicated like in Toronto and even in smaller places like Hearst (residential, multi-residential, new multi-residential, commercial general, residual commercial band 1 & band 2, industrial, pipelines, farmlands and managed forest). wooo.. that's a long list. New Brunswick is: Residential, residential: non-owner occupied, residential - other, and non-residential. Then there are separate programs like FLIP for farm land. Plus a list of exceptions that is worth reading.

So, please do not be fooled: the government is a common scapegoat because it does so often create too much red tape. In this case, the myth is false. In fact, New Brunswick has simplified the task. I will even take it a step further: New Brunswick has argued that they give a credit for living in your own home, hence residential rate being lower than non-owner occupied. PEI also has the same credit for home owner residents. This was put in place in many provinces to attempt to prevent what FINTRAC misses and to discourage from foreign interests buying out to local land so locals can no longer afford it. Vancouver is often cited as the classic case of why such measures are important. Now, that said... there are programs that could improve renting like in British Columbia where they incentivized creating rental units on their properties. In particular their Laneway program was particularly interesting in attempt to create more independent units and generate more diverse neighbourhoods.

I do not pretend to understand why this has been blown way out of proportion to what it really intends to achieve. I wonder who actually benefits from blaming the government for an expense that if it was a commercial property ($2.1860 per $100 of assessment) building versus a residential house ($1.1233 per $100 of valuation), the non-residential rate would be substantially hirer still. So, do you want to complain about not living in a house you are renting or do you become an actual rental business and pay fully double taxes. Important to note that there is a further taxation of $0.0486 per $100 of assessed value of non-owner occupied residential through the Residential Tenancies Act. So, there is an interesting twist, the Residential Tenancy board adds their own fees on top of the Finance and Treasury department. It is expensive to rent here.

In my own humble opinion, there are three kinds of situations that win here:

Owner residential occupied homes that happen to have a rental unit or a rental room and pays regular taxes.
Non-owner residential home that has no mortgage.
Non-owner residential occupied homes that have 2-3 units to rent to cover the increased taxation plus the residential board's fee.
Commercially owned buildings of 5 or more units who pay the full commercial taxes.

Personally, I could never make the numbers work to rent out a single family home as a unit between the mortgage, taxes, increased insurance costs, increased maintenance costs, plus figuring out my own time management to check on the place and have cash flow for emergencies. To those who figured it out: I tip my hat. It is also telling of how much has changed in our economy over the past decade alone. I often see folks renting separate rooms in the house or going the AirBNB routes.

Much luck in finding your dream property and do not let silly nomenclature that creates an unnecessary barrier to being able to make dreams reality. Just have to plan it right :)

Have a wonderful day!

Amanda, The unLibrarian

Referential website links for Double Taxation:

The Unlibrarian

Double Taxation Myth: Buying Rentals in New Brunswick

Double Taxation

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