Toronto Real Estate – Land Transfer Tax
The City collects revenue from property taxation. Toronto real estate Transactions with closing dates after February 1, 2008 were charged a Municipal Land Transfer Tax (MLTT).
According to a recent article by Susan Pigg at the Toronto Star, a Report commissioned by the Ontario Real Estate Association claims that municipal home and sales levy has led to a 2.3 Billion dollar drop in economic activity and repealing it would create 12,000 new jobs in the next 5 years.
“It’s bad for our economy and bad for homebuyers,” says Costa Poulopoulos, president of the Ontario Real Estate Association. (Who, for full disclosure’s sake, commissioned the report.)
According to the Study, Toronto has seen an estimated decline of more than 38,000 home transactions since the tax was imposed in 2008, making home ownership more expensive and Toronto the only city in Canada where homebuyers are double-taxed: they have to pay both a municipal and a provincial land transfer tax on the purchase of a home.
Furhter, the report states that the loss of sales has translated into a roughly $2.3-billion drop in economic activity in Toronto since 2008, and a $1.2-billion reduction in GDP. There would be nearly 15,000 more jobs in sectors from real estate to law to furniture and appliances stores without the Toronto-only land transfer tax.
The economic analysis was done by Altus Group Economic Consulting. The study relied heavily on two previous studies: a 2012 C.D. Howe Institute report that estimated the impact of the tax on housing transactions, as well as a 2013 study for the Canadian Real Estate Association that examined the economic impact of a typical house transaction in Ontario.
Altus researchers then took those reports one step further, looking back and also ahead at the economic fallout of the tax.
The study went on to note that the economic damage is much bigger than the gain for the city, the average revenue the municipal land transfer tax generated each year since 2008 has been $270.2 million.
The annual take now is about $350 million a year, thanks largely to soaring house prices. That’s close to double the amount collected in 2008.
Toronto Mayor Rob Ford had long vowed to eliminate the municipal land transfer tax. However, when faced with strong resistance to getting rid of the revenue stream for the city, he talked about reducing it by 5 or 10 per cent instead. He has yet to follow through with either eliminating or reducing the Toronto Land Transfer Tax. A recent Toronto Star Article suggested that it should be made an election issue for the upcoming mayoral election.
Land transfer taxes now add up to more than $14,000 in upfront costs on a $550,000 home purchase in Toronto — about $7,500 of that being the provincial tax and $6,700 the city tax.
“This research proves that the (municipal tax) is doing more harm than good where our economy is concerned,” said Poulopoulos. “It gets in the way of the economic spinoff that occurs when homes are purchased and sold.”
Will Toronto Eliminate the Municipal Land Transfer Tax?
At the end of the day, whether it be repealed or decreased will likely be a decision of the new mayor of Toronto. It will be interesting as the mayoral race progressing to see where they all stand on the issue.
Will it happen? Who knows. We were already promised by the current mayor that the tax would be eliminated.