Archived columns and blog posts by Matt Elliott

Taking on TREB's take on the Toronto land transfer tax

By: Matt Elliott Metro, Metro Published on Thu Jun 27 2013

After I published a post last week imploring Toronto real estate agents to get over their obsession with the city's five-year-old land transfer tax, I heard from a bunch of people who agreed. Some of them even work in real estate. They get that cutting $340 million out of the city budget necessarily means negative consequences, whether they come in the form of much higher property taxes over the long-term or service cuts to the kinds of municipal programs that actually help make Toronto a desirable place to buy a home.

But then there was the Toronto Real Estate Board. They didn't like my arguments so much.

TREB emailed asking for a chance to respond. And I'm happy to give it to them.

Here's what TREB's Chief Government and Public Affairs Officer Von Palmer had to say in a letter to Metro's editors:

  • Toronto is the only place in Ontario where you pay a municipal LTT on top of the provincial LTT, upfront.
  • Studies have found that the Land Transfer Tax is directly responsible for dampening Toronto home sales by 16% per year.
  • This tax unfairly forces only five percent of Torontonians each year (those purchasing a home), to subsidize the other 95 percent.

We will keep fighting on behalf of home buyers, because that is the right thing to do.

Palmer's points are well taken, but I'm still holding to the position that, taken together, they don't add up to a great argument for why the city should force itself to either find more than $300 million in service cuts or significantly increase the property tax burden on residents.

TREB gets a lot of mileage out of their claim that the land transfer tax is “double taxation,” which is one of those things that sounds terrible even though it hardly makes a lot of sense. If Toronto levying its own land transfer tax on top of the provincial land transfer tax qualifies as double taxation, then so too should the years-old practice of the provincial government levying its own sales tax atop the federal GST.

And, hey, both the provincial and federal governments tax my income too — sound the double tax alarm.

As for the idea that “Toronto is the only place in Ontario where you pay a municipal LTT on top of the provincial LTT, upfront,” I'm not really sure what else there is to add. Does anyone dispute that? Is there a reason that kind of thing is inherently bad?

I think most home buyers understand that their municipal tax burden will vary based on the municipality they choose to buy into. Sure, in Toronto, a $500,000 house will come with an upfront bill for about $5,725 to pay off the municipal land transfer tax. But it'll only cost me $4,152 in annual property taxes, according to this calculator. And yeah, if I buy the same house in Missisauga, I skip the land transfer tax, but my property tax bill comes out about $800 higher each year — at $4,910. If I live in the Toronto house for about seven years, I actually come out ahead in terms of taxes paid to the municipality — even with the upfront land transfer tax.

None of this would seem to be about what's “the right thing to do.” It's just different approaches to municipal finance.

But what about the idea that Toronto's land transfer tax has actually hurt the real estate market? TREB's statistic that the land transfer tax “is directly responsible for dampening Toronto home sales by 16% per year” sure sounds bad. But it turns out they get that figure from a C.D. Howe study — a study with a methodology that raises a lot of questions.

C.D. Howe doesn't, for example, look at condominium sales in their study. They just decide to put that whole segment off the market off to the side. And condos, you might have heard, kind of make up a giant part of Toronto's real estate market.

And that 16% figure isn't just a straight-up decline in the number of home sales after the land transfer tax was implemented. Instead, the Institute glosses over data showing that sales and the average price of real estate actually increased after the implementation of the tax and instead focuses on a narrow comparison of “forward sortation areas.” By doing so, they limit themselves to comparing sales in border areas, so sales in areas of Etobcioke were compared to sales in areas of Mississauga, for example, while areas of Scarborough saw comparisons to parts of Durham Region.

If that seems like a convoluted way to conduct this kind of analysis, then I'm with you.

Much simpler is this the notion of fairness. “This tax unfairly forces only five percent of Torontonians each year (those purchasing a home), to subsidize the other 95 percent,” says TREB. But this line of thinking runs dangerously close to an argument against progressive taxation.

Yes, people who are in a position to afford pricy real estate in Toronto are contributing more revenue to fund the services this city needs. On years they buy houses or condos, they're definitely paying more than your average minimum wage renter or that pair of seniors that have lived in their home for fifty years. But I don't necessarily see anything wrong with that. It might actually be fairer.

This post was originally published at on 2013-06-27T00:00:00.000Z

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Matt Elliott

City Hall watcher, columnist and policy wonk in Toronto.
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