Rent cap for tenants, tax cut for landlords unveiled in budget
'More needs to be done for renters,' finance minister says of budget that also includes income tax cuts
- $6.3 million increase for affordable housing
- $110 million to help fund federal-provincial child care agreement
- $343 million to pay for wage increases in public sector
- 26 per cent increase to tourism budget to support sector
- $3.3 million to fight drug crime
The Higgs government will cap rent increases for tenants this year as it revives a COVID-delayed promise to reduce property taxes for the owners of apartment buildings.
Rent hikes will be capped at 3.8 per cent for all of 2022, retroactive to Jan. 1, Finance Minister Ernie Steeves announced in his budget speech to the legislature Tuesday.
Last year, the Progressive Conservatives rejected the idea of a rent freeze or cap, arguing the market forces of supply and demand would eventually take the sting out of rent spikes.
They're now admitting that hasn't happened yet, and are reversing themselves.
"Despite record levels of multi-unit construction and a growing supply of rental units, the vacancy rate continues to fall and rents continue to climb," Steeves said.
"While we are confident that the market will catch up with demand, and the property tax measures we have introduced today will help, our government acknowledges that more needs to be done for renters."
While he described the measure as a one-year rent cap, Steeves told reporters it could be extended past 2022 depending on what the market looks like next year.
"It certainly will be reviewed after one year, but I would only commit to one year at this point and we'll see what happens," he said in a news conference.
"There's an awful lot of stuff going on in the world and it's hard to predict where we'll be."
Economist Richard Saillant said once voters get used to the cap, it'll be hard for the PCs to end it, especially as an election gets closer.
"For a government that was essentially saying that there's no problem and the market's going to take care of everything, this is certainly a major turnaround."
Crackdown on kicking out tenants
In addition to the rent cap, the province will also ban landlords from kicking out tenants without cause. Tenants who are kicked out without cause will be eligible for compensation, and landlords will be subject to penalties.
Steeves announced the changes in tandem with a 50 per cent cut to the provincial property tax rate applied to apartment buildings, rental homes and cottages.
Other residential properties such as nursing homes, and non-residential properties such as businesses, will see a 15-per-cent cut.
Those reductions were initially part of the March 2020 provincial budget but they were cancelled when the beginning of the COVID-19 pandemic upended the province's fiscal projections.
Steeves said he hoped the property tax reductions would spur the construction of more apartment units in the province by landlords facing rising assessments.
The measures are part of a relatively spendthrift budget by the standards of the Higgs government, which held the line on expenses over the last two fiscal years to record surpluses of $408 million in 2020-21 and a projected $487.8 million in 2021-22.
Province to trim income taxes
Steeves is forecasting a much smaller surplus this year of $35.2 million as the Progressive Conservatives open the spending taps and reduce taxes.
He said that was possible because the government is "hopeful we are over a good chunk" of the COVID-19 pandemic, which caused a deep, but brief, economic downturn.
"Last year COVID was such a fear and that was certainly negative, and you know what? Things turned out wonderfully," he said. "Not for everyone sick with COVID. I'm not saying that. But financially it turned out well."
The Department of Health will get a 6.4 per cent in increase to its budget, which Steeves says is the largest increase since 2008.
The province will also cut income taxes again this year to offset the federally imposed April 1 increase to the carbon tax.
Higgs has urged Ottawa to suspend the tax to give drivers relief from gas prices that have hit record highs, in part due to the Russian invasion of Ukraine.
But the federal government rejected the idea. The tax will increase from 8.8 to 11 cents a litre at the end of the month.
That translates into $40 million in new revenue, which the province says it will return to New Brunswickers by making more of their incomes tax-free.
The threshold for low-income people to pay no income tax will increase from $18,268 to $19,177. Officials estimate 10,000 more people will pay no provincial income tax as a result.
And a total of 400,000 taxpayers will see some reduction with an increase in a non-refundable provincial tax credit from $10,817 to $11,720.
It's the second straight year of personal income tax cuts designed to offset the impact of the carbon tax.
All the new spending and tax reductions, and the resulting smaller surplus, also mean the province won't be paying down much of its accumulated debt in the coming year.
After reducing the projected net debt from $14 billion to slightly below $13 billion this year, the Tories will let it creep up slightly in 2022-23. But it will still be below $13 billion, and will be smaller relative to the province's gross domestic product.
Saillant, who has criticized the Higgs Tories for lowballing revenues for the last two years only to report large surpluses, says he believes the government is doing the same thing again.
He pointed out the government is predicting strong economic growth in the coming year, yet at the same time is forecasting declines in revenue sources such as sales tax – which normally go up when the economy grows.
"I suspect they have greater resources than they let on," he said, speculating the PCs will again record a higher-than-forecast surplus later on in the year.
Steeves called the revenue project the "best forecast we can give. Is it a conservative one? I don't know. We're conservative by nature in Finance, I guess. … We do the best prediction we can. We don't go in looking to float the numbers one way or the other."