Housing starts in New Brunswick lagging further behind Maritime neighbours in early 2024
CBC
The New Brunswick government missed its target for new housing starts in 2023 by a wide margin but says it is still not interested in cutting sales taxes on new apartment builds in 2024, despite provinces that have tried the idea experiencing a surge in new construction.
Figures show Prince Edward Island and Nova Scotia saw construction start on new apartments at a rate three times higher than New Brunswick during the first three months of 2024, after they moved to lower construction costs by cutting taxes.
Kelvin Ndoro, a housing analyst with the Canada Mortgage and Housing Corporation, said eliminating sales taxes on new rental developments does appear to be helping to get housing built more quickly in provinces that adopted the policy, at least in the short term.
"The general view from the developing community is the HST rebates are expediting ongoing projects," said Ndoro.
Last September, Prime Minister Justin Trudeau announced the federal government was making good on a mothballed 2015 election promise to stop charging 5 per cent GST on the construction of new rental buildings to encourage faster development of housing.
Trudeau then urged provinces to copy the plan to amplify the effect of the tax change.
"We are going to be removing the federal GST for the construction of new apartment buildings, and I'm encouraging all provinces to do the same," said Trudeau on Sept. 14.
A number of provinces agreed to the idea, including New Brunswick's two Maritime neighbours. Nova Scotia and Prince Edward Island both dropped their own portion of the HST charged on new rental property construction, with a variety of conditions, to add to the federal reduction.
Nova Scotia Premier Tim Houston said he was unsure what cutting the sales tax would accomplish but the urgency of getting new housing built in Nova Scotia convinced him to join the federal initiative.
"In the fullness of time, will this particular step prove to have been the most effective?" Houston asked, rhetorically, in announcing the tax cut last fall.
"I don't know that it will but we're going to try everything, including this. It's an idea and we're in the business of trying ideas to solve problems, so we're trying this one."
New Brunswick is equally in need of new housing. However Finance Minister Ernie Steeves rejected the federal idea as too expensive.
Developers can owe millions of dollars in HST at the end of building a large apartment complex, and governments eliminating that charge are hoping stalled or economically marginal projects will become viable and move forward.
Houston acknowledged the initiative could cost Nova Scotia up to $100 million in reduced sales tax per year, or more if it triggers more construction than expected, but said cost was not a deterrent.
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