New Brunswick landlords warn of 'significant' rent hikes next year

A spokesperson for New Brunswick landlords is warning that a gap in protection against enormous property tax increases will result in significant rent hikes for tenants next year.

However, critics are questioning that warning, considering many tenants have seen hefty rent hikes even while landlords have been protected against big increases in property taxes in recent years.

"It's using the taxation as an excuse [to raise rents]," said Peter Jongeneelen, co-chair of ACORN New Brunswick, a tenants' rights group.

"No matter what, with no rent control in the province, we're still going to see rents go up."

New Brunswick Apartment Owners Association president Willy Scholten says landlords in the province are anticipating big increases to their property tax bills next year. (Shane Fowler/CBC)

Willy Scholten, president of the New Brunswick Apartment Owners Association, says landlords are bracing for a large jump in the property taxes on their buildings in 2025 and will be left with little choice but to pass that on to tenants.

Since 2022, apartment owners have been covered by a provincial policy capping the annual increase in assessed property value for which taxes had to be paid, said Scholten, who also serves as the chief financial officer for Colpitts Developments.

That meant, for example, if the assessed value of a property went up by 30 per cent in 2022, the owner's tax bill was only based on the assessed value going up by 10 per cent.

Scholten said the 10 per cent spike-protection policy was continued for 2023 and 2024.

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In the last four years, the assessed value of apartments in New Brunswick went up by 64 per cent on average, he said.

Scholten said starting next year, the same spike protection will be reflected through new legislation, but not before the total outstanding assessed increases get lumped into apartment owners' 2025 bills — in addition to any potential increases for that year, up to 10 per cent.

"It's going to have a significant impact on the rents that we have to charge," Scholten said.

As an example, a Colpitts apartment building at 34 Abbott Ct. in Fredericton grew in assessed value by about 64 per cent, from $5 million in 2021 to $8.2 million this year.

While Colpitts would have owed $160,909 in property taxes for this year, it actually only had to pay $130,619, thanks to the spike protection.

Peter Jongeneelen, co-chair of ACORN New Brunswick, says some tenants have seen big increases in rent as landlords have enjoyed protections limiting how much their property taxes can be raised each year. (Submitted by Peter Jongeneelen)

With a pause in spike protection expected for next year, Scholten said that property's tax bill will rise by at least 23 per cent, considering its assessed value doesn't decrease.

"Taxes for our business represent 35 to 40 per cent of our operating costs, so with [assessments] going up 44 to 54 per cent in two years, it's obviously going to mean a major impact on tenants' rents."

CBC News asked for interviews with Social Development Minister Jill Green, as well as Service New Brunswick Minister Mary Wilson, but neither were made available for interviews about the spike protection for landlords.

In an email, Service New Brunswick spokesperson Jennifer Vienneau didn't deny that a gap in spike protection for landlords would be happening in 2025.

She said the provincial government has met with members of the New Brunswick Apartment Owners Association about the issue, and Service New Brunswick and the Department of Finance and Treasury Board are reviewing the details of their questions.

"As agreed during the last meeting, we will respond to association members once we have completed our analysis," Vienneau said.

Rents increased amid spike protection

While the provincial government protected landlords against big jumps in their property taxes in recent years, Jongeneelen is questioning whether that benefit got passed down to tenants.

"In the last four years we've seen places, even in my neighborhood that I know of, rent increases being like you know 45, 50 and 60 per cent," said Jongeneelen, speaking from his home in Moncton.

"You know, if there was tax breaks that were given in the previous years, why did the rent go up that much?"

Temporary rent cap

In addition to protecting apartment building owners from large increases in assessed property values starting in 2022, the provincial government also cut the provincial property tax rate going forward from that year.

That resulted in lower tax bills being issued in 2023 and 2024, compared to 2022, for some properties.

The province meanwhile implemented a one-year rent cap in 2022, preventing landlords from raising rents by more than 3.8 per cent.

However, that ended in 2023, and other measures implemented in its place have been criticized as ineffective by tenant advocates.

Last October, Statistics Canada reported the average cost of rent in New Brunswick was nine per cent higher than it was a year earlier. That increase put average rent in the province at 28.7 per cent higher than what it was in 2020.

In response to questions about why rents have gone up, Scholten said property taxes aren't the only bills that landlords have to take into account.

"We've had insurance go up over those last four years 50 to 60 per cent. Building materials have gone up, in some cases over 100 per cent," Scholten said.

"The housing industry is getting hit with extreme inflation increases."

MLAs argue for reprieve for both sides

The spike protection landlords have enjoyed should continue uninterrupted next year, said Tracadie-Sheila MLA Keith Chiasson, Liberal critic for Service New Brunswick.

However, if limits on property taxes are going to be imposed for landlords, there should be something similar in place for tenants, he said.

"We need that spike protection for property owners, and at the same time, just to make sure that, you know, some aren't taking advantage of the hot market, I think we do need a rent cap just to kind of protect those renters," Chiasson said.

Memramcook–Tantramar MLA and Green Party housing critic Megan Mitton said she also thinks property owners should see the spike protection continue uninterrupted next year.

Green Party MLA and housing critic Megan Mitton says there needs to be 'spike protection for tenants as well.' (Ed Hunter/CBC)

But she said it's interesting the province has chosen to protect landlords against big tax increases, but won't afford similar protection to tenants.

"There's a willingness to protect homeowners and apartment building owners ... but not to protect tenants," Mitton said.

"There needs to be kind of a spike protection for tenants as well."

Further push to remove provincial tax

Scholten said what he wants to see the province do to address his concerns is to remove the provincial portion of property taxes that must be paid on non-owner-occupied apartment buildings.

That tax rate is set at 0.5617 and gets tacked on top of the tax rate applied by municipalities.

Finance Minister Ernie Steeves, in early 2020, said his government would eliminate that tax, but backtracked after the pandemic began.

New Brunswick Finance Minister Ernie Steeves announced in 2022 his government was cutting the provincial property tax rate in half. (Jacques Poitras/CBC)

In 2022, Steeves announced his government was partly moving forward again with that plan, announcing it would cut the provincial property tax rate by half.

Scholten said he wants to see the tax removed entirely, adding that any discussions around imposing a rent cap until then are unrealistic.

"To have a rent cap that is capping revenues when there is no control over expenses, and a historic increase in taxes where we're at right now, that just doesn't, that doesn't make sense," he said.

Steeves wasn't made available for an interview about whether his government plans to further cut the provincial tax rate for non-owner-occupied buildings.