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Nova Scotia Premier Tim Houston in March, 2022. The Premier said the now-cancelled tax hike was an attempt to slow real estate speculation.Andrew Vaughan/The Canadian Press

Nova Scotia Premier Tim Houston has reversed course on a plan to hike taxes on properties owned by non-residents, saying he was concerned about the damage it would cause to the province’s reputation as a place to visit, live and invest.

The provincial government announced on Thursday it will not move forward with a non-resident property tax that would have tripled the levy for properties owned by people who don’t live in Nova Scotia year-round. The proposed hike, introduced in the spring budget, drew fierce criticism from out-of-province cottage owners, including a group who argued the new tax would violate the Canadian Charter of Rights and Freedoms.

The Premier said the now-cancelled tax hike was an attempt to slow real estate speculation. The government had argued Nova Scotia’s red-hot housing market had become unaffordable for many first-time buyers in the province.

“My intentions all along were to improve home affordability, not to be at odds with our core value of being a welcoming province,” Mr. Houston said.

“So today I will put my personal pride to the side. 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 commit to finding a tool to make home affordability, particularly for first-time home buyers, a reality in this province.”

Nova Scotia eyes higher taxes for non-residents to take edge off housing crisis

My fellow Canadians: Nova Scotia doesn’t want you

While several provinces have introduced foreign buyers taxes in recent years, most don’t have special property levies that affect other Canadians.

Nova Scotia’s proposed tax of $2 per $100 of assessed value on properties owned by non-residents went further than any other province, including British Columbia, which has a 0.5-per-cent speculation and vacancy tax on out-of-province property owners. About half the 27,000 properties in Nova Scotia owned by non-residents belong to people who reside for most of the year in Ontario.

Some out-of-province cottage owners say the prospect of tripling their property taxes forced them to consider selling their properties. They credit a letter-writing campaign, early legal efforts and the support of Nova Scotian businesses for helping to sway the Premier.

“This is a huge financial relief. We were seriously reconsidering whether we could manage the cost of that cottage,” said Toronto’s James Mackintosh, whose family has owned a seaside property on the Chester Basin for more than 60 years.

“We felt hurt by this and we felt it was unfair. So it took courage for Premier Houston to listen and to back off from this. We feel like democracy worked.”

The province will still go ahead with a 5-per-cent deed-transfer tax on homes bought by non-residents, which was also introduced in the spring budget. Earlier this week, the province announced a scaled-back version of the non-resident property tax, with an exemption for military members, before scrapping it entirely.

Mr. Houston said adjusting the policy was an attempt to make it more fair, but his government eventually recognized the broader risk to the province.

“I believe the risk of reputational damage to Nova Scotia is becoming more and more real, and it’s something I’m not willing to accept. So we’ll find another way to address the housing issue,” he said.

“Sometimes it’s difficult to anticipate where something might go in the minds of the public. But we did not foresee that this would change the view of Nova Scotia in the eyes of people.”

Nova Scotia’s real estate market has been torching previous sales records, with homes in the Halifax area typically going well over $200,000 above the asking price. The average price of homes sold in January, 2022, was a record $392,828, an increase of 23.2 per cent from January, 2021, according to the Nova Scotia Association of Realtors.

The Premier has been under intense pressure to address housing concerns as the province’s population swells past one million. The residential vacancy rate in Halifax is just 1 per cent, among the lowest in Canada. The city’s downtown is the fastest-growing urban core in the country, its population surging more than 26 per cent from 2016 to 2021, Statistics Canada says.

Non-residents own about 4 per cent of all properties in Nova Scotia, according to StatsCan. That’s higher than both Ontario (2.2 per cent) and British Columbia (3.2 per cent), which introduced foreign buyers taxes in 2016 and 2018.

The province’s real estate association celebrated the cancelation of the non-resident property tax, saying the increased taxes would not have freed up “meaningful housing supply” or had a significant impact on affordability.

“We believe these taxes would, however, have unintended and negative consequences on our economy,” the association’s spokesperson, Tanya White, said in a statement.

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