TORONTO, December 12, 2018 -- The Toronto Real Estate Board is concerned about the City of Toronto's continued reliance on the Municipal Land Transfer Tax (MLTT) revenue to balance its budget. TREB's concern is validated by the recent City Finance Department update, being reviewed by City Council on December 13, 2018, showing revenue from the LTT $100 million lower than expected. This will be an ongoing challenge and concern for the City's finances and steps should be taken now to reduce that dependency, notwithstanding that the current overall City budget is expected to see a year-end surplus.
TREB has long been a vocal and outspoken critic of land transfer taxes, believing that they are an unfair and inefficient government revenue tool. The impact of these taxes is not just the substantial sum that it adds to the upfront closing costs for home buyers; even more significantly the LTT reduces mobility and discourages right-sizing, thereby reducing the number of homes for sale. Predictably, a reduction in sales contributes to less LTT revenue for the city. The buyer of an average priced home in the City of Toronto now pays $13,335 upfront in MLTT, and this is in addition to a similar $13,335 in LTT to the province.
TREB has consistently pointed out, in recent years, that the City's budget has relied more and more heavily on a revenue source that has already been criticized by the former City Manager for being unpredictable and unreliable. City Hall should be focused on making home ownership in this City more affordable, not less; and should be relying less on this tax, not more. TREB understands that eliminating these taxes is unlikely, at least in the short-term. However, there are steps the City can take now to help mitigate the negative impacts of these taxes on housing supply and choice:
The unpredictability and unreliability of land transfer taxes as a government revenue stream is one of the many reasons that make these taxes ill-suited for funding important public services, and why it would be irresponsible for any additional municipal governments to pursue this taxing authority and if they do, it should not be granted by the province.
With the City's 2019 Budget process expected to begin soon, TREB looks forward to working with City Council on this important issue.