Toronto council eyes land transfer tax hike on high-end homes as experts warn of economic cost
As Toronto city council readies to examine a range of revenue tools that could generate much-needed municipal cash, Mayor John Tory insisted Tuesday that now was not the time to hike the land transfer tax on high-value homes.
“We should be very careful in that regard,” said Tory. “Right now we’re coming out of a pandemic situation, which has been very difficult for a lot of people.”
The Mayor’s executive committee was set to examine the possibility of a hike to the municipal portion of the land transfer tax on properties valued at $2 million or more.
City staff had updated their projections on potential yields for the tax in response to a council request, examining how much municipal coffers stood to gain if the tax was hiked to three per cent or more on luxury properties.
In a scenario where a graduated hike was implemented on home values above $2 million, staff predicted that the levy could generate up to $30 million in incremental revenue annually.
But a study published by the C.D. Howe Institute Tuesday suggested that the move could have negative consequences on the broader economy.
“These kinds of taxes put sand in the gears of the economy,” said Benjamin Dachis, public affairs director for the institute. “They change people behaviour.”
“These kinds of expenses lead to a large number of people deciding not to buy a home. And when you decide not to buy a home, that has a broader economic cost.”
That cost could include a detrimental effect on provincial land transfer tax revenues, Dachis noted.
Real estate broker Andre Kutyan argued that the proposed $2-million threshold was arbitrary in Toronto’s hot housing market.
“Most of the people who own homes, or who are purchasing homes over $2 million are just average buyers and sellers who are moving up in a market where they’ve been able to do so in the past few years,” Kutyan told CTV News Toronto.
“When the average detached home in the 416 is $1.7 million, $2 million is only 17-to-18 per cent higher than that. So really you’re targeting a segment of the market that is not really true luxury.”
The Municipal Land Transfer Tax has raised more than $6.4 billion since it was first implemented in Toronto in 2008.
City council will consider the full report in its July 14-15 meeting.