Manitoba·Analysis

Could the NDP's education tax overhaul end up exacerbating the housing crisis?

Taxation changes planned by the NDP government for the benefit of homeowners could make the housing crisis worse for renters in Manitoba.

Apartment building owners will not receive rebates which could mean fewer new builds, higher rents

A row of large houses, one of which is under construction, are shown in winter.
Infill housing in Winnipeg. The provincial government plans to overhaul education taxes in 2025 in a manner that removes less valuable homes from the provincial property tax rolls — but will increase the bills for properties with higher valuations. (Tyson Koschik/CBC)

If you ask Premier Wab Kinew, the changes his government envisions for education taxes next year will benefit the average Manitoba homeowner.

That much is completely clear from the provincial property-tax changes outlined in the new provincial budget. 

What is much less clear is what the changes mean for the average Manitoban who does not own a home.

Starting in 2025, the province plans to do away with both the 50 per cent education tax rebate brought in by the previous PC government and the longstanding $350 education tax rebate.

In their place, residential homeowners will receive a property tax credit of up to $1,500. The change means the owner of any home with a gross education tax bill of $1,500 or less won't pay any education taxes at all next year.

The owners of properties with gross education tax bills between $1,501 and $2,299 will still pay some provincial property taxes next year, but under this scheme, their total bills will be less than they are now.

This is what allows Kinew to claim that 83 per cent of Manitoba homeowners will see a benefit from this particular tax overall.

"I invite anyone to look ahead to the $1,500 homeowner tax credit we're bringing in and compare it to the cheques that the previous government mailed out," Kinew said Tuesday at the Manitoba Legislative building during a midday press conference.

"Manitobans are going to be better off with this plan. You're going to be better off in dollars and cents."

So who will pay more under this plan, compared to today? For starters, the owners of properties with education tax bills of $2,301 or more.

That may not pose much of a problem to an NDP base that presumably wants to see more affluent Manitobans — and generally speaking, people who own more valuable homes tend to be more affluent — shoulder a greater share of the overall tax burden.

That same left-of-centre base might not be too upset to learn that owners of commercial properties in Manitoba won't receive any education tax credits at all. That means no more rebates for large corporations or real estate investment entities that own shopping malls, office towers and other properties valued in the tens or even hundreds of millions.

The potentially problematic aspect of this plan involves rental apartments, whose owners also will not receive any rebates.

If your first impulse is to say "too bad," no one will blame you. Given the nationwide housing crisis, it is fair to say the public is not overly sympathetic to landlords at this moment in time.

This is why it may come as a rude awakening to this very young NDP government that the taxation changes they're planning could make the housing crisis worse in this province.

Two men sitting at a table.
Premier Wab Kinew and Finance Minister Adrien Sala, speaking to reporters during Tuesday's budget lockup, said changes to education taxes will benefit most Manitobans. (Tyson Koschik/CBC)

In short, what the Kinew government has planned for education taxes in 2025 may lead some developers of multi-family housing to charge more for rent once their rental apartment buildings are completed.

Some smaller developers may even scale back or abandon their projects, as some are already contemplating.

How is this possible? All across Canada, construction inflation has been driving up the cost of building new apartments for nearly a decade.

And since the second year of the pandemic, rising interest rates have eaten further into the profit margins for the very same projects.

Finally, insurance rates are on the rise, driven to some extent by natural disasters induced by climate change. This too is contributing to the cost of housing.

The bottom line is every level of government is finding it difficult to stimulate more multi-family housing starts right now, even here in relatively low-cost Manitoba.

"The substantial decline in multifamily permits and starts is good evidence that rent inflation and education tax rebates have presented no windfall to developers," said Jordan Sodomsky, president of Forthright Properties, which builds apartments and townhouses in Winnipeg and elsewhere in southern Manitoba.

"Increases in interest rates along with disproportionate inflation in both operating and construction costs have weighed heavily on the industry, and so fewer and fewer projects make economic sense."

Sodomsky said Manitoba must move carefully when it comes to changes to property taxes. He chose his words carefully when asked to comment on what the Kinew government has proposed for 2025.

"Well-intentioned objectives can exacerbate existing inflation by driving up the costs to operate and further curtailing the supply of desperately needed housing stock," he said.

The 2024-25 budget also calls for some help for apartment builders. It envisions an $8,500-a-unit credit for new apartments rented out at market rates. The budget also calls for $13,500-a-unit credits for apartments deemed affordable under the provincial definition.

That may not be enough to stimulate development. Nervous lenders may need to be sold on financing marginal construction projects that rely on credits after they're completed. 

The budget also calls for some help for tenants. The renter's tax credit is slated to rise in 2025 to $575, an increase of $50 over this year.

That works out to an added monthly benefit of $4.17 for people living in apartments. 

Premier shrugs off concerns

Regardless, Manitoba's premier dismissed the idea the policy he created to help homeowners may end up hurting renters.

"We're lowering costs for you. We're helping those who need it most," Kinew said on Thursday.

The premier also declined to comment on the fact the province itself stands to benefit considerably from this change. The education tax overhaul will allow the province to rake in an additional $148 million next year, according to budget documents.

That is the single greatest new source of revenue in the 2024-25 budget. Since some of that money will be collected from corporations with billions in assets, few Manitobans will complain.

But if this taxation change really does end contributing to a multi-family housing-construction slowdown, the NDP runs the risk of losing face with its base.

WATCH | 2024 budget highlights

Manitoba NDP delivers 1st budget

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Manitoba's NDP government tabled its first budget on Tuesday, April 2. Here's a look at the province's spending plan.

ABOUT THE AUTHOR

Bartley Kives

Senior reporter, CBC Manitoba

Bartley Kives joined CBC Manitoba in 2016. Prior to that, he spent three years at the Winnipeg Sun and 18 at the Winnipeg Free Press, writing about politics, music, food and outdoor recreation. He's the author of the Canadian bestseller A Daytripper's Guide to Manitoba: Exploring Canada's Undiscovered Province and co-author of both Stuck in the Middle: Dissenting Views of Winnipeg and Stuck In The Middle 2: Defining Views of Manitoba.