Double taxation, lack of investors, and climbing rental prices; the struggle to meet rental needs in Charlotte County

Facebook photo The Beacon Waterfront Apartments in St. Stephen are the most recent addition to the rental accomodation market in town, and all four floors filled almost as soon as the doors opened.

CHARLOTTE COUNTY – Head over to the Apartment & House Sales & Rental St. Stephen and Surrounding Area Facebook page, and you’ll see most posts begin with the same two words; looking for.

While it was no secret finding a place to rent in St. Stephen, Saint Andrews or St. George was a challenge, the Southwest New Brunswick Service Commission (SNBSC) recently put theory to paper, and has released a 2020 Municipal Housing Study; a comprehensive look at housing, rentals, and availability (or more accurately, lack thereof) in the region.

“While each municipality has specific challenges and assets, all suffer from a lack of affordable, quality rental units,” states the study early on.

In 2019, planners from SNBSC, and representatives from Horizon Community Health, and Vibrant Communities Charlotte County, formed a “working group” to source resolutions for what could almost be termed a local housing crisis.

“While the market generally meets the needs of homeowners, current renters face a host of issues at much higher rates than homeowners,” says the report.

“To name a few: over-spending, lack of space, lack of maintenance, difficulty finding appropriate dwellings, and discrimination.”

The biggest issue potential renters face? Lack of available units.

According to the study, the vacancy rate in Saint Andrews was 2.3 per cent last year. In St. George, it was 2.1 per cent, and in St. Stephen? The vacancy rate drops to a staggering 0.3 per cent.

St. Stephen resident Racheal Gravely spent three months looking for a new place to live for herself and her two young children when the rent at her previous rental unit jumped from $700 to $1100 per month.

“I wasn’t looking for anything in particular, but it did have to be a two to three bedroom as I have two young kids,” said Gravely. “And just one cat as of now. I had to rehome my dogs due to not being allowed to have them.”

Gravely said she has found a place “through the good people of this town”, and while it’s not ideal for her family, Gravely is relieved to have “a roof over our heads”.

And it’s not just the struggle of keeping locals in four solid walls. For regions to grow, they require new residents, and if there’s nowhere to live, bringing those residents in becomes a challenge.

“The low rental vacancy rate adds distinct challenges to attracting new residents for a few reasons,” said President of Future St. Stephen, Kendall Kadatz.

“For potential employees looking to locate here, they may not be in the position to buy initially, or may want to spend time in the community before committing to buying a house.

“Not having many options available for rent puts pressure on both of these circumstances. Other people looking to locate here for work are not able to take a position if they can’t find a place to live, so it keeps them from moving here as well,” he added.

Kadatz said St. Stephen is looking at various ways of effectively making itself more appealing to investors, through the identification of available land for development to contacting current developers and asking what assistance can be offered to accelerate the building process.

Kadatz also mentioned St. Stephen’s new municipal plan, one that sees options for development open-up in the municipality.

St. Stephen Mayor, Allan MacEachern, says he’s “not surprised” by the low vacancy rate percentage.

“We knew it was low,” said MacEachern. “And needed the study to help investors secure financing, and encourage development by showing facts.”

And the facts point to an interesting opportunity. With less than a 1 per cent vacancy rate, St. Stephen shows itself to be a hotspot for potential investors who want to get into the rental unit game.

The study shows for St. Stephen to have any hope of keeping stride with current growth projections, it will require a minimum of 431 additional rental units over the next five years, and that number is on the heels of the new Beacon Waterfront Apartments in town, which hit capacity of its four floors almost the moment its doors opened.

“We are working on new development for all different housing needs and just recently amended our new municipal plan for a zoning change for new rental development (coming soon),” said MacEachern.

“We are focused on housing accommodation, and working daily on it,” he added.

“It is affecting our businesses on finding workers. Without new employees, it is holding back growth. Also our new municipal plan, just approved last month will help with new development of all types.”

The new municipal plan, details of which can be found in the February 2021 council packages, in its most simple terms opens up better development potential via reworked zoning within the Town of St. Stephen.

And it’s not the only town council to look at new zoning and by-laws to help a situation out.

The Town of Saint Andrews has been looking at changing by-laws which would limit the number of short term, vacation style rentals in the seaside hotspot, to force homeowners into opening up to long-term renters.

It’s a notion Deputy Mayor Brad Henderson can’t see his way to supporting.

“In my opinion, the municipality should use the housing shortage as an opportunity for growth versus restricting current property owners,” said Henderson.

“With our aging demographic, the town could use this as an opportunity to maintain or grow the population.

“There are opportunities within town limits that could provide a more diverse housing inventory, but not take away from the historic feel of our community. With a new municipal plan, and a new council, I am hoping this will be the number one priority for the council’s term,” he added.

The same report which shows St. Stephen will require the better part of 450 new rental units over the next five years just to possibly meet with projected demand shows Saint Andrews and Saint George will both need near as makes no difference to 200 new units each to do the same.

“One area where there was agreement between renters and owners is that the availability of rental housing is not good,” states the report. “(With) Almost 80 per cent of respondents saying the availability is poor or very poor.” So what do these municipalities need? It’s actually very straightforward; investors. The art of drawing the investor is one each town spends resources doing, but there is a big bollard blocking the way; the provincial double property tax.

The Coles Notes version of the double property tax? It’s the New Brunswick-centric art of taxing owners twice on the same property, once they accumulate more than a single business or dwelling.

Fun facts: New Brunswick is the only province in Canada to employ a double property tax, and in an interview with the Courier in 2019, Premier Blaine Higgs agreed the double property tax was a deterrent to investors. March 2020 saw a proposed plan that would reduce the double taxation by 50 per cent over four years. But in May of 2020, the province reversed its proposed plans to reduce the double taxation on second properties, leaving the original framework solidly in place.

“Not only is it (double taxation) holding back new development of rentals, it is preventing investors from building hotels in New Brunswick and is our major obstacle,” said MacEachern.

“When I went to P.E.I to meet a hotel developer, double tax is what is holding him back. Double tax also prevents proper maintenance to apartment buildings. With less profit, there is less money left to maintain the buildings, which causes lower assessment, which will be less taxes paid,” he added.

And when development costs more money, profits are impacted. So where are those costs laid? At the feet of the renters.

According to the study, “affordable housing” equates to rental fees that don’t exceed more than 30 per cent of the before-tax income of said household. In Saint Andrews, St. Stephen, and St. George, between 30 and 46 per cent of renters are paying rent in excess of that 30 per cent “affordable” figure.

“The feedback from developers has been consistent for years that the tax on second properties adds unnecessary costs to development, raises costs for renters, and ultimately deters development in New Brunswick,” said Kadatz.

“Investors inside and outside New Brunswick look at these as one of the first factors in determining where to build as property tax is one of the most significant ongoing operational costs in a housing development.”

“The reality is the double taxation makes investment, in particular affordable housing, less attractive and feasible in our province. Home owners and developers must look at other models to justify the cost of their investment. Every extra dollar charged is passed directly onto to the tenant,” he added.

“The reality is the double taxation makes investment, in particular affordable housing, less attractive and feasible in our province,” said Henderson.

“Home owners and developers must look at other models to justify the cost of their investment. Every extra dollar charged is passed directly onto to the tenant.”