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Linda Northwood of Toronto recently bought property in Nova Scotia with her husband Mark.Nikos Schwelm/Handout

In an effort to ease the unprecedented pressure on its housing market, Nova Scotia is trying something few provinces have done before: increasing taxes for all residential property owners who don’t live in the province full-time.

In last week’s budget, Nova Scotia introduced two controversial tax measures: a 5-per-cent deed transfer tax on homes bought by non-residents and a 2-per-cent tax on properties owned by people who normally reside outside the province. The government says the new fees, which will triple the property taxes for a seasonal property, could generate $81-million in the coming fiscal year and help make more housing available for Nova Scotians.

The new taxes won’t affect buyers who are moving to Nova Scotia permanently; they only target those who maintain a primary address elsewhere. Out-of-province property buyers will have six months after their closing date to become residents and avoid the new transfer tax.

While several provinces have introduced foreign buyers taxes in recent years, most don’t have special property levies that affect other Canadians. British Columbia applies a 0.5 per cent Speculation and Vacancy Tax on out-of-province property owners, but no other province has gone this far. 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.

Nova Scotia realtors, and the province’s real estate association, say the new taxes target the wrong people and do nothing to deter speculators, who are helping drive up the prices of homes in cities such as Halifax. They say the policy will hurt rural communities and won’t ease the province’s housing crunch.

“It’s discriminatory,” said John Duckworth, a real estate broker in Kingsburg, N.S., a small coastal community on the South Shore, where about half the residents are seasonal. “I don’t see any other province treating their non-residents this badly. It leaves the impression that people from outside the province aren’t welcome, and I think that’s a huge problem.”

Nova Scotia’s population has ballooned during the pandemic, passing one million for the first time, and Premier Tim Houston’s government has been under pressure to address a crippling housing shortage. In Halifax, the residential vacancy rate is just 1 per cent, among the lowest in Canada. The city’s downtown is the fastest-growing urban core in the country, surging more than 26 per cent from 2016 to 2021, according to Statistics Canada.

About 4 per cent of all properties in Nova Scotia are owned by non-residents, according to Statistics Canada. That’s higher than both Ontario (2.2 per cent) and British Columbia (3.2 per cent), where foreign buyers taxes were introduced in 2016 and 2018.

“It’s incredibly difficult to find housing, whether it’s affordable housing or even attainable housing … so we’re hopeful this measure will help people who are struggling to find a place to live,” Finance Minister Allan MacMaster told reporters.

Mr. Duckworth argues that non-residents have injected millions into the rural economy by building new homes and renovating older properties, often in places that were in decline for years. When he bought a one-room schoolhouse by the beach in Kingsburg in 1972, the community was full of crumbling, neglected buildings. Today, the former fishing village has been rejuvenated into a retirement and vacation destination, he said.

Many seasonal properties in the province are rented out when their owners aren’t there, generating tourism revenue, Mr. Duckworth said. He warns that some of these homes may be sold as a result of the new levies and worries they will have an impact on new home construction in rural areas.

Seasonal property owners aren’t a drain on government services, Mr. Duckworth says, because their children don’t attend local schools and their home provinces reimburse Nova Scotia’s health care system for any costs. Instead, they’re being unfairly penalized because they’re seen as non-voters who can afford more than one home, he said.

“It’s like a wealth tax – I think that’s how they see it,” he said. “But most of these people aren’t wealthy.”

Mark and Linda Northwood of Toronto are among the thousands of non-residents facing steep increases in their property tax bills. The couple bought land in the Kingsburg area sight unseen a year ago and planned to build a retirement home on the property.

Now they’re having second thoughts.

“If we had known this was coming a year ago, we would never have bought that property,” said Mr. Northwood, a 63-year-old private investigator. “We intend to be residents when we retire. But we’d like to retire on our terms, not the government’s.”

Mr. Northwood said he sympathizes with first-time homebuyers who are struggling to get into the housing market, but doesn’t see how a “tax on rural communities” will help. He said he and his wife are also reluctant to give up their access to Ontario’s health care system by becoming permanent residents of Nova Scotia, which has a well-publicized shortage of doctors.

“We love the people of Nova Scotia and we’re still attracted to the province,” he said. “But the government is a completely different story. We don’t see the logic in any of this.”

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