First-time buyers spared in tax plan
First-time home buyers will be protected, but a recommendation to harmonize Toronto’s land-transfer tax with the province’s rates will cost other residents an additional $750 to move house.
On Tuesday, the city’s budget committee endorsed the harmonization, but also increased the tax rebate to first-time home buyers by $750 — to $4,475 from $3,725.
The harmonization, which still has to be approved by city council, would mean $77 million more annually in land-transfer tax for the city, according to a city manager’s report last fall.
The budget committee is recommending Toronto put $640 million in landtransfer revenue toward its operating budget this year — $15 million more than last year.
That is despite a warning by the city manager that relying on land-transfer tax is risky.
Councillor Gary Crawford, budget committee chair, agreed with that assessment.
A correction in the city’s scorching housing market makes that revenue vulnerable, he said on Wednesday.
But for now, Toronto needs the money. Without it, residents would have to pay more in service charges, Crawford said.
“Harmonizing” the municipal tax with the provincial land-transfer tax will still add a $750 cost for other homeowners who are moving
“The municipal land-transfer tax is not necessarily a fair tax, but we do rely on that considerably,” he said.
The Toronto Real Estate Board (TREB) praised the budget committee’s protections for first-time buyers who are confronting home prices that average about $1 million in the city.
But “harmonizing” the municipal tax with the provincial land-transfer tax will still add a $750 cost for others who are moving, said Von Palmer, TREB’s chief communications and government affairs officer.
That’s because the provincial landtransfer tax rate is higher — 1.5 per cent compared to 1 per cent for the city — on property values between $250,000 and $400,000.
“We’re trying to explain to the public what’s really going on here,” Palmer said.
“People should not be fooled into thinking that harmonization is revenue neutral. It is not. It’s a 7-per-cent increase in the land-transfer tax rate except (for) first-time home buyers.”
The policy is puzzling, given that the city manager and councillors recognize that the tax is unreliable, he said.
The rebate for first-time buyers is slightly higher than the one offered by the province, which was doubled to a maximum $4,000 this year.
Even so, first-time consumers have lost ground, according to TREB.
“First-time buyers are allowed a rebate of the land-transfer tax that is payable on a purchase price of up to $400,000, which was the average price when this tax was implemented in 2008. The average price in 2016 was over $700,000,” the board said in a release.
The average home sale in Toronto includes about $11,000 in municipal land-transfer tax. That is in addition to the provincial tax averaging about $12,000.
The city is facing a $91-million shortfall on its operating budget despite a proposal to eliminate about $10 million in service and about 400 staff positions.