Land Transfer Tax Archives

Sustainability February 4, 2017

Outlook for 2017 Toronto housing market is red hot

The Toronto housing market is one of the most unaffordable housing markets in the country, and it appears as if prices will continue to rise in 2017. This housing bubble in Canada is putting substantial pressure on people who are desperate to find housing — and little is being done to change it.

The Canada Mortgage and Housing Corporation (CMHC) keeps track of all the Canadian housing markets and releases alerts when the cost of housing in a given city is increasing at a faster rate than the rate of average income. In October 2016, CHMC put the entire country on its first ever red alert, mostly due to the spill-over effects of Toronto and Vancouver’s housing markets. Vancouver has taken steps to cool their market by implementing a foreign buyer tax, but Toronto has yet to implement any great changes. Frankly, Toronto is in hot water and without government intervention soon, housing will rise an extra 10 to 16 per cent this year.

In December 2016, an average house in Toronto was $730,432 and if the averages were to rise to the anticipated 2017 levels, a home could become a whopping $825,000. This prices most people out of the market, and leaves many without an option of a permanent residence. The Royal Bank of Canada completed a Canadian Housing Health Check for 2017, and highly recommended the government step in to cool off Toronto’s housing market. Nothing has been done as of yet.

Recently, the City of Toronto road toll proposal was abolished by the Ontario Liberals, under the leadership of Premier Kathleen Wynne, which leaves the municipal housing market as one of the only ways for Toronto to make money for city needs. This puts the already-pressured housing market in a frightening position, as higher taxes in the form of a proposed harmonized land transfer tax or increased property taxes would raise costs even further within the Toronto boundary. Toronto Real Estate Board (TREB) released research on Tuesday emphasizing that any added tax pressure to the city’s market would push up prices in the GHTA further because the tax wouldn’t be in these boundaries. It could also impact the rental market negatively.

In order to afford a house, co-buying is growing in popularity, as people come together to buy a home. Though mortgage companies are stricter when it comes to co-buying with non-family members, putting funds into one large pot is a creative solution to being able to purchase a home. It also fosters a shared sense of community and lowers the burden of financing a home with an over-inflated price.

The housing bubble will eventually pop and it will have devastating consequences on homeowners if interest rates sky-rocket. There is a lot of danger in having high home prices and low interest rates, including selling to people who can’t realistically afford what they are purchasing. Instead of continuing the upward housing cost trend, the government needs to intervene and cool the market. People deserve a home and places like Toronto and Vancouver should be accessible to all, not just the select few. The city may benefit off housing in the short-term, but an inflated market will have nasty side-effects and affordable housing needs to become a central priority on a municipal, provincial and federal level.

Toronto December 11, 2016

What’s the deal with Toronto’s revenue tools?

The City of Toronto is facing a budgeting crisis with over $91 million worth of funds to find by City Council. Several revenue tools were presented by city manager, Peter Wallace in an effort to find money to fill the gaps and pay for all of the projects that are much-needed in Toronto.

Terms like ‘property tax’, ‘municipal land transfer tax’, ‘parking levy’, and ‘expressway tolls’ , are being thrown around like crazy, and it is easy to get lost in the world of financial terms. Understanding the inner-workings of the various revenue tools is the best way to decide which financial tools should be adopted by the city and which of them should be discarded. That’s why Women’s Post has created this guide, to help our readers understand the ins and outs of the revenue tools presented in the executive committee, and what terms will be flying around next week at city council.

Property Tax

Property tax is a commonly used revenue tool and is most often brought up in city council. A property tax is a levy on a property the owner is required to pay. It is set by the governing authority of any given area, which in this case is the municipality of Toronto. Property taxes in Toronto are a hotly contested issue because Toronto property tax rates are the only metropolitan tax that is lower than the surrounding area, the GTHA, and politicians don’t want to raise them. The city has proposed a two per cent property tax hike, but Toronto Mayor John Tory vows to raise the property tax no higher than half a per cent. Instead he is pushing for alternatives instead of pushing more tax on property owners.

Municipal Land Transfer Tax

Municipal land transfer tax has been a popular option for Toronto in the last year and helped keep the property tax inflation rate at bay in last year’s budget. The municipal land transfer tax is a fee that is paid by the person who purchases the home to the municipality that is charging it. There are rebates for first-time home buyers and other jurisdictions, such as Vancouver, have imposed a foreign land transfer tax to help lower inflation in the real estate market. It is a useful tool, but was used in the 2016 budget so may not be a viable option when looking at other options for 2017. City Council will discuss harmonizing the Ontario land transfer tax with the municipal option, which would require legislative changes but would streamline the process in the long-run.

Personal Vehicle Tax

The personal vehicle tax has been a revenue tool that was presented in the past before at City Council and was not a popular option. Council will consider the re-introduction to tax $120 per vehicle annually, but Tory has stated he is not a big fan of this option. The rejection of the personal vehicle tax has angered environmental groups who want to see people choosing to drive vehicles in the city pay extra taxes. The personal vehicle tax is also an easy and quick tax to implement because it doesn’t require any extra infrastructure.

Hotel Tax

The hotel tax revenue tool is being hotly contested by the tourism and hotel industry, which has already seen slowed growth due to the increasing popularity of air bnbs and other short-term stays. By placing an extra tax on the hotel industry, it may put more pressure on hotels to pay when they can’t afford to do so. Tory rebutted in the executive committee though that the annual subsidy supplied to hotels would help pay for the hotel tax if it were approved. This revenue tool would require provincial legislative and regulatory reforms, and is not a popular option in regards to fairness, efficiency, and is low in revenue quality according to Wallace’s presentation.

Expressway Tolls

Expressway tolls are the newest revenue tool to be introduced by Mayor Tory and is a popular option. The expressway tolls would require vehicles to pay a fee when they use the Don Valley Parkway and the Gardiner Expressway. If the city charged $2 per trip, the annual revenue would be $166 million per year. The start-up cost to build the expressway tolls would be an estimated $100-$150 million and have ongoing operational costs of $50 to $60 million. The expressway tolls would require provincial legislative changes, but could be implemented in the 2017 budget. City Council will be focusing heavily on tolls next week.

There are many other revenue tools that were presented including an alcohol beverage tax, a parking levy, a third party sign tax, graduated residential property taxes, and a municipal sales tax. From the climate of the executive committee meeting, it would be surprising to see any of these options be approved. They have not been given the same amount of attention as the hotel tax and expressway tolls. A graduated residential property tax and a municipal sales tax in particular require provincial legislation changes and were listed by Wallace as aspirational changes to be further discussed in 2018.

In order to fully grasp the many revenue tool terms that will fly around at City Council next week, focus on the most important options that are available. Also remember to bring popcorn. Even though discussing financial tools can be a bit of a bore, City Council is sure to get lively when discussing the various revenue tools that were presented for debate.

Sustainability November 17, 2016

Land Transfer Tax Refund for first-time homebuyers is a small change

Instead of implementing grand-sweeping changes in the hot housing market, Ontario will commit to helping first-time homebuyers who are struggling voraciously to purchase homes in Toronto.

Ontario will double the maximum Land Transfer Tax Refund to $4,000 for eligible first-time homebuyers as of January 1, 2017. This means there would be no Land Transfer Tax on the first $368,000 paid for a first-time home. This will help people who were unable to purchase a home due to rising property costs and taxes.

Along with lowering the rates for first-time homebuyers, Ontario has decided to raise the rates of one- or two-bedroom single-family residences over $2 million to 2.5 per cent. This would mean that home buyers in the over $2 million market would pay an extra $5000 on average, which is affordable for the many buyers in the upper echelon. The funds raised from the rate increases would be used to fund the first-time homebuyer’s initiative. The refund was announced as a part of the 2016 Ontario Economic Outlook and Fiscal Review.

The Land Transfer Tax Refund has been met with mixed reviews, many citing it as a soft approach to a larger issue. The housing market in Toronto has been in the hot zone for several months and creating more opportunities for first-time buyers does little to cool the market in the larger metropolitan centre. Though Vancouver’s foreign buyer’s incentive was a bit high-handed, the Land Transfer Tax Refund is the complete opposite and accomplishes very little.

The Land Transfer Tax will benefit first-time homeowners outside of Toronto due to inflated prices within the city boundaries. The average price for first-time homes outside of Greater Vancouver and Toronto is $361,000. Alternatively in Toronto, prices were 19 per cent higher than last year’s.

Though the refund will do little to help the heated markets in Toronto, any little bit to aid first-time homebuyers to compete in Toronto’s housing market is welcome. Even if the homebuyer will spend more than $365,000 to purchase in the city, a rebate on the Land Transfer Tax will help homeowners to save money initially and use it to keep up with hefty mortgage payments thereafter.

Helping first-time homebuyers and increasing taxes for wealthier homeowners is a smart move, but broader strokes from Ontario may be the only way to cool the Toronto housing market. Providing affordable housing and hitting density targets is also an important step, like looking into zoning bylaws at a municipal level and allowing for laneway housing. Housing is one of the most difficult files in Ontario’s fiscal review and the housing sector awaits with bated breath what future options the ministry considers.