Higher rents likely, Manitoba landlords warn after province removes education property tax rebates

Some Manitoba landlords say they'll have no choice but to raise rents, after the provincial government promised tax relief for at least some rental property owners under its overhaul of the education property tax system but failed to deliver.

This is the first year in which the NDP government is providing homeowners with a credit, valued at up to $1,500, on their school taxes.

Under the former Progressive Conservative government, the province instead offered a 50 per cent rebate on school taxes, but all residential property owners were eligible — not just homeowners. 

Finance Minister Adrien Sala said a year ago the NDP government was revamping the way the education system is funded and would find a way to help landlords — the "small businesses," as he described it — left out by the new credit system.

But the new education funding model was scrapped, seemingly along with any tax breaks for landlords and commercial property owners specific to education property levies.

Landlords 'mad as hell'

Avrom Charach, spokesperson for the Professional Property Managers Association, said the landlords his group represents aren't pleased.

"They're mad as hell, because we're absorbing [the added costs] this year, and because it'll pass on to the tenants."

Charach said higher rents are inevitable, and his business, Kay Four Properties, is likely to apply next year for rent increases above the government's cap.

Rent hikes this year are generally limited to 1.7 per cent (some units, including those in buildings first occupied after March 2005 or with monthly rents above $1,640, are exempt).

Charach says that cap is well below other cost increases to city and school taxes, water and sewer rates, and waste collection.

"It's not just the landlord raising rent. It's that we're being forced into raising the rents," he said.

He pointed to a 48-unit apartment complex owned by Kay Four Properties on Jefferson Avenue in Winnipeg, which is losing out on a rebate that last year was worth more than $19,000.

"The only choice we have as property managers is to continually apply for these rent increases above the guideline, because we're always catching up," he said.

Sala wouldn't acknowledge in an interview Thursday his earlier pledge to help "small businesses" with their education property taxes.

Instead, he stressed the province is keeping costs low for businesses through various measures, including a one-year freeze on electricity rates and an upcoming $10-million security rebate program. 

He also touted the government's decision to reduce payroll taxes, but that measure doesn't take effect until 2026 and only helps businesses with a high enough payroll — at least $2.25 million this year, and at least $2.5 million next year — to pay the tax.

"We're focused on supporting small businesses, and that's exactly what that measure does. It will help them to lower their costs," Sala said while touting the payroll tax changes. 

Kay Four Properties is already exempt from the tax because its total payroll is lower than the threshold, Charach said.

'Another nail in the coffin'

Garrett Wong runs a Winnipeg property management company that oversees around 300 landlords, the majority of whom own one or two properties.

Those landlords are starting to realize the government isn't coming through with promised relief, he said.

"The loss of the credit is just another nail in the coffin for lots of our homeowners," said Wong, who owns Upper Edge Property Management.

"If the rent's not high enough to be able to cover your mortgage, property tax, insurance, they're just going to sell, which is going to remove rental stock from the city, which is what we don't want in the first place."

Wong said there are always landlords who want to unload their rental properties, but in the past year or two, they're citing different reasons.

"What we're seeing is people telling us they're getting out because they can't afford it. That's a difference."

The elimination of the education property tax credit isn't the only reason some landlords are making that decision, Wong said, but it is one of the factors.

Landlords want to be treated with the same tax fairness as other homeowners, he said.

"It always seems like the landlords and rental property owners are left behind, and yet we are housing providers," said Wong.

Renters will be hurt: builder

Jordan Sodomsky, president of Forthright Properties, said rising costs associated with building and managing apartments and townhouses, including higher education property taxes, can't be absorbed indefinitely.

That leaves no choice but shifting a "[greater] share of the educational tax burden" to renters, he said in an email.

"I have to imagine that is not the intent of this government's tax policy."

Interim Progressive Conservative Leader Wayne Ewasko accused the NDP government of breaking its promise of lowering costs for businesses.

Higher operating costs are unacceptable, especially as trade wars contribute to economic uncertainty, he said.

The NDP has said its new property tax credit leaves the majority of homeowners paying less than they did under the former system, but owners of some more valuable properties are paying more.

Budget documents now estimate the province will rake in an additional $182 million in 2025 through this tax change, an increase from the $148 million government officials forecast last year.

Manitoba landlords warn lack of school tax relief will mean higher rents

21 days ago

Duration 2:08

Residential landlords are warning of higher rents for tenants, due to the Manitoba government's decision to exclude them from any relief on their education property taxes.