A trio of Toronto city councillors is floating the idea of a new and higher tax bracket on sales of the most expensive homes, a move they say could raise millions for people struggling for housing.
Ana Bailao, Brad Bradford and Joe Cressy announced Friday that they will be seeking a staff report into the feasibility of modifying the land transfer tax so that homes selling for more than $3-million are subject to a 3-per-cent levy. The top bracket is now 2.5 per cent on sales over $2-million.
They say that such a change would raise a projected $5.1-million for a city program called Housing Allowance. This provides between $250 and $600 monthly to people facing eviction for financial reasons or people trying to leave the shelter system.
“People who are doing very well and have benefited from the housing market will also help to ensure that those struggling to live here can find a home here,” Mr. Cressy told reporters.
The motion these councillors are proposing calls on city staff to look at funding options for the Housing Allowance, “including but not limited to” the creation of a new top land transfer tax fee. A spokesman for Mayor John Tory said he would support the motion, adding in an e-mail that “he hopes the report will look at a wide range of options as to how to pay for these housing allowances.”
John Pasalis, president of Toronto brokerage Realosophy Realty, warned that the proposal might have an unintended consequence for lower-priced homes as well.
“The reality is the challenges right now are the move-up buyers,” he said. “If someone’s living in a $1.5- or $2-million home and wants to upsize to a $3-million home, if the costs are really high it prevents them from moving up, which kind of stifles a little bit of the supply in the more affordable end.”
Brad Henderson, president and chief executive of Sotheby’s International Realty Canada warned that escalating taxes and fees could discourage some people from moving.
“It puts another tax on an already overtaxed real-estate market,” he said.
“It’s causing friction in the system which means that less properties are trading hands on an annual basis.”
The land transfer tax – a power granted to Toronto by the province, and which can be modified by council – has become an essential part of the city’s budgeting process. Staff are expecting it to raise about $730-million this year.
The money raised by setting a new top bracket would not go into the general pot of city revenues but would be earmarked for the Housing Allowance program. There are 5,000 people currently receiving money under this program, the councillors say, and boosting the land transfer tax could mean this support being extended to another 1,000 people each year.
“It’s housing paying for housing,” said Ms. Bailao, who is also a deputy mayor and chair of the city’s planning and housing committee. “It’s a much more economical way to deliver services. If you look at the money that we’re spending. If you look at hospitals and shelters … it is much cheaper to house somebody.”
The city’s land transfer tax was instituted in 2008. The city’s real estate market has since gone into overdrive, but the tax’s brackets have not risen in step. It was only in 2016 that the top bracket was raised to sales over $2-million, an increasingly common price in the more desirable areas of the city.
According to the councillors raising the idea of modifying the tax, about 775 homes now sell annually for more than $3-million. A decade ago, fewer than 200 homes sold annually above that level.
Council will consider the item at its upcoming meeting, which begins next Wednesday.