January 28, 2014
As Toronto City Council considers the 2014 Capital and Operating Budgets this week, members of the Toronto Real Estate Board (TREB) have stepped up their efforts in voicing opposition to the Toronto Land Transfer Tax. Here are some pretty revealing facts:
- Toronto is the only Municipality in Canada with a Land transfer tax imposed on purchasers of real estate.
- The average price of a single family home in the city is approximately $570,000—and rising, fast. Translation? The average—non first time-buyer pays a minimum of $15,000 in combined land transfer taxes: $7,875 on the provincial portion and an additional $7,125 imposed by the City.
- First time buyers receive a rebate on both taxes, lowering the burden to just shy of $9,500. However, the highest Land Transfer Tax rate kicks in on homes priced over $400,000 for ALL home buyers, considerably lower than the City’s current average price mentioned above.
- The average purchase price represents the most competitive segment of the housing market. Thus, by and large, the real figure is skewed much higher as current supply levels have not kept pace with the demand for single family homes.
- The City of Toronto has tagged expected “revenues” of $335 million from the Land Transfer Tax for 2014
“Relying on an unpredictable revenue source like the Land Transfer Tax, which fluctuates with the City’s real estate market, poses risks. The proposed budget that City Council is currently debating relies on this unpredictable revenue stream more than ever before. Instead, City Council should be focusing on predictable budgeting options and cutting the Land Transfer Tax, instead,” said Dianne Usher, President, Toronto Real Estate Board.
When the City’s 2014 budget process began last November, City staff recommended budgeting $335 million in revenue from the Land Transfer Tax for 2014 which allowed for a buffer in revenue expectations to account for potential fluctuations in the real estate market.
Since then, the City’s Budget Committee and Executive Committee have amended the proposed Budget to increase the budgeted revenue from the Land Transfer Tax by over $20 million, exposing the City’s budget to a degree of volatility if indeed current real estate market trends were to reverse.
The Toronto Real Estate Board feels that eliminating the Land Transfer Tax on the first $400,000 value of a property, at a minimum, for all home buyers, would be a healthy first step to providing some relief from this tax. Setting this threshold at $400,000 would ensure that first-time home buyers would be no worse off.
If a lower threshold is preferred, the current rebate for first-time home buyers should still be maintained, and potentially expanded, indexed to inflation going forward.
“Even first-time home buyers purchasing below average–priced properties are currently being forced to pay thousands of dollars in Toronto Home Buying Tax, because the City’s first-time home buyer rebate has not kept pace with inflation,” said Von Palmer, TREB’s Chief Government and Public Affairs Officer.
TREB has also pointed out to City Council that the current Land Transfer Tax rates are regressive because they force people purchasing below-average priced homes to pay the highest tax rate.
“The Home Buying Tax has become more and more regressive as home prices have increased, because its tax rates have not been adjusted with inflation. Someone purchasing a home priced below the City’s average price is being charged the highest tax rate. That’s not right,” said Palmer. TREB also told City Council that potential new real estate transactions resulting from a reduction in the Land Transfer Tax could help off-set any impact to the City’s budget.
“Potential growth in home sales resulting from a Land Transfer Tax rate reduction could help offset the impact to the City’s budget. Research by the C.D. Howe Institute has shown that the Land Transfer Tax has dampened home sales in Toronto by 16 percent annually.
If a Land Transfer Tax rate reduction helps to reduce or reverse this effect, the resulting extra home sales, which may not have occurred otherwise, could generate new off-setting revenue for the City, while bringing more balance into the market,” said Usher.
TREB is encouraging the public to visit www.LetsGetThisRightToronto.ca to tell City Council to do the right thing and phase out the Home Buying Tax. Thousands of Torontonians have already done so.