Break on city’s land tax touted as housing looms over election

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Can a little tax reform help bring hope back to Toronto?

Daniel Steinfeld, president of the Toronto Regional Real Estate Board, thinks it could – and one of his targets, the land transfer tax, has become something of a villain during this month’s election campaign.

A recent poll found that housing affordability will be a major factor for many in Toronto and across the GTA when they cast their ballots in their municipal elections on Oct. 26.

Steinfeld said while many factors are behind the high price of housing, one thing Toronto City Hall could do is ease up on its municipal land transfer tax.

While Ontario charges a standard land transfer tax, Toronto is unusual in that it has its own on top of that – and it’s a five-figure obstacle for any homebuyer.

“Not that I believe there’s no turning back,” Steinfeld said, “but I do think we need to almost reintroduce hope into people and the possibility of a positive outcome.

“People have been so disenfranchised by what the current environment is that Step 1 is not just, change a policy and all of a sudden things are affordable again, right? I do think you need to re-instil the confidence in your constituents, and especially young people, and people who are going to form the workforce and build the economy in the years to come.

“They need to believe that, you know, it’s a slow-turning ship, but that things are turning back into the right direction, because the trend has been going in the wrong direction.”

City Hall’s ‘low-hanging fruit’

The polling may only capture some of that despair. Thousands have already fled the city, with a recent report out of Toronto Metropolitan University laying the blame on housing costs.

Brad Bradford, one of Toronto’s two key candidates for mayor, has repeatedly brought up a figure in that report on the campaign trail: more than 77,000 people moved away from the city just last year.

Steinfeld said the land transfer tax is “in a lot of ways a low-hanging fruit” for City Hall.

It’s a significant “upfront cost,” not something covered in a mortgage, which takes some people “right out of the conversation,” he said.

Unlike issues such as zoning or input costs such as materials or labour, it’s also something City Hall can easily change.

TRREB also argues that the tax is just out of date. A rebate covers the tax on homes priced at $400,000 or less, which made a lot more sense 20 years ago.

Bradford has honed in on the land transfer tax as a key cause of housing unaffordability. He’s pledged to eliminate the tax on homes below the average price – $1.1 million for 2025.

The Bradford campaign estimates that’s worth about $18,000 and would apply to roughly two-thirds of Toronto’s resale homes.

Bradford’s main rival, incumbent Olivia Chow, has also made housing a pillar of her campaign, although her focus is quite different. She has touted the creation of rental homes and affordable units in her first term, and has committed to building 65,000 homes by 2030.

Steinfeld said TRREB applauds “any candidate who can come up with a solution and present creative ways to start to tackle this.” While he thinks the land transfer tax badly needs changing, he also recognizes it’s a source of revenue that the city might find hard to replace.

86% back break: Poll

Still, polling suggests Toronto and the GTA are facing a real problem.

A recent Ipsos online survey, conducted on behalf of TRREB, found housing affordability will factor into the ballots of 69% of voters in the GTA and Barrie. More than three out of four respondents – 76% – said they’re frustrated by the limited local progress on housing affordability, and 82% said municipalities aren’t doing enough.

A vast majority – 86% – said they would back a tax break for first-time homebuyers. A little more than half said cities are relying too much on development charges.

About half of Toronto – 55% – thinks City Hall leans too hard on land transfer taxes, the poll suggests. Across the GTA, 63% thought that was also the case with property taxes.

Combined, municipal and provincial land transfer taxes come to about $33,000 on a typical Toronto home, TRREB says. There are also other costs cities can target, perhaps most notably development charges.

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Steinfeld said affordability shouldn’t simply be equated with prices going down, however. Cheaper studio condos don’t mean much to a family that needs a three-bedroom home.

“It’s not just the cost … It is reimagining what types of properties and what types of building is happening,” he said. “Especially in a big city like Toronto, it can’t just be highrises with little units and single-family homes. There needs to be more of a focus on townhouses and low-rise and three-bedroom condos, places where families can be raised in non-traditional developments.

“And a lot of that rests on cities also, to start incentivizing and allowing those things to be built easier.”

Everyone, everywhere?

While discussions about affordability might call to mind young renters struggling to cobble together a down payment, Steinfeld said high prices also affect homeowners who need a change.

“People move up. People move down,” he said.

Bradford made that same point Thursday, when he said seniors in Toronto often can’t afford to downsize. In addition to a promised property tax freeze and a break on water bills, he again brought up his land transfer tax relief.

“A city that taxes people for moving is a city that stops moving,” Bradford said in a statement.

“When a senior can afford to downsize, a young family gets a house with a backyard and a school down the street, and the senior gets to stay close to everything she knows. Today the tax punishes both of them.”

While the municipal tax – not to mention the high prices – make this issue an especially pronounced one in Toronto, Steinfeld said it’s clear to TRREB that this is a hot topic all around the GTA.

“It’s an everywhere issue, and it extends even beyond Toronto proper and the 416,” he said. “The ability that people have to get shelter that they need is still very difficult, and that’s across all regions of the city.”

jholmes@postmedia.com