A luxury home tax could bring Toronto an extra $18 million in revenue
Toronto could see an extra $18.7 million in revenue this year if city council approves a proposed luxury home tax.
I’m fine with it. We should also use the money to do a major rent supplemental program. Rents have been rising astronomically over the past few years.— Stephen A. Marano (@stephen_marano) October 4, 2018
And with house prices set to go over $1 million this year, many see this proposed tax as a good thing.
Don’t consider it & do it!— Gigi 🧚🏻♀️ (@eflorian10) February 10, 2021
Right now, properties valued at more than $2 million are subject to a municipal land transfer rate of 2.5 per cent, in addition to provincial fees. But supporters of the tax argue that a one-per-cent hike could generate much-needed cash for things like affordable housing and transit.
According to a Toronto budget briefing note, increasing the rates by one-per-cent (from 2.5 per cent to 3.5 per cent) on property sales with a value of consideration higher than $2 million could bring in an additional $18.7 million in revenue.
If the threshold were set at properties worth $3 million, the city would generate an additional $6.4 million.
"It's really about looking at where we can generate revenue to pay for the things that we need here in the city of Toronto," Councillor Brad Bradford told CTV News Toronto. "We have an affordable housing crisis. We certainly have a lot of issues related to transportation and mobility."
This proposed tax would be similar to what Vancouver has done. But Sotheby's International Realty Canada CEO, Don Kottick, pointed out some of the negative consequences he saw in Vancouver.
"It stalled activity in the market for luxury housing over $3 million, therefore many people delayed decisions to move up or out and their homes did not come on the market. This trickled across many segments of the market, such as for attached homes which are popular with young families and downsizers, and contributed to a lack of supply and housing options," he said in an interview.
City councillors do note that the potential tax may lead to some kinks.
For example, the proposed tax might just incentivize buyers and sellers to just buy and sell below the cut-off. It could also slightly reduce the liquidity of real estate, and discourage current home owners from up-sizing, potentially tightening housing supply for mid-value homes.
Other experts say this luxury home tax will hurt, rather than help, the economy.
"It's going to have an adverse effect on the supply," Dianne Usher, managing broker with Sotheby's International Realty Canada told CTV News Toronto.
"Sellers are becoming increasingly weary about selling because they've got nowhere to go, so this will just add to the inventory shortage."
So maybe it's time to revist the vacant home tax instead?
According to city staff, if approved by city council, the change would require at least two months to implement.
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