Anthony Furey: Now’s the time to scrap Toronto’s land transfer tax

Shortly after becoming mayor of Toronto in 2010, Rob Ford tried to reduce the amount of the city’s municipal land transfer tax (LTT).

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The much-loathed tax placed on the purchase of new homes within city limits had only come into effect a couple years earlier, introduced by then-mayor David Miller. It was a duplicate tax — replicating the Ontario provincial land transfer tax that buyers were already paying.

As a councillor, Ford was often one of the few advocates of fiscal sanity. He’d opposed the tax from Day 1 and, during his successful mayoral campaign, pledged to eliminate the whole darn thing.

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But, once in office, Ford was encouraged by those around him to temper his plans and only reduce the tax by 10 per cent. Even that proved too steep a hill to climb at city hall.

The bureaucracy and media did what they always did with Ford and went into attack mode, saying that such a cut to revenue — it would have meant a reduction of about $35 million — would harm the city coffers and Ford would need to account for how he’d make it up. Alas, the cut never came to be and the tax was normalized in the minds of home-buyers and voters.

Many years have passed since that policy battle, and we now hear regularly from politicians and bureaucrats concerned about the housing crisis and housing affordability. There has been a continual stream of press conferences, policy proposals and funding announcements about how to reduce the cost of housing.

Yet there has been little to no suggestion from Toronto city hall to implement the only cost reduction directly within the control of municipal government: reducing or eliminating the LTT. While reducing development charges can lower costs, this is an indirect lever because the builder pays them. The LTT, on the other hand, is paid directly by the buyer on closing.

The conversation is now back in the spotlight thanks to Toronto mayoral candidate Brad Bradford, who has promised to eliminate the municipal LTT for many buyers if he’s elected.

Bradford announced on Tuesday that he will change the LTT so first-time buyers, or any Toronto homeowner selling one home within the city and then buying another, will pay no tax on the first $1.1 million of the purchase. The tax will still apply to investors and corporations.

“Three of four Toronto renters don’t believe they’ll ever be able to afford to buy a home here,” Bradford said. “I refuse to accept that’s the best we can do.”

There’s always been something inherently wrong on a moral level with double taxing a family on their home purchase, and even more so during a housing crisis.

Young buyers need to be informed that older generations weren’t subject to the same cash grab when they were starting out. Bradford is promoting generational fairness.

This will be an uphill battle, though. Right on cue, Bradford is facing the exact same push-back levelled against Ford.

The talking point is that Bradford must account for where he is going to make up the revenue shortfall and that unless he can answer that first, such a policy shouldn’t go ahead.

But Bradford is seeking a mandate to make this policy a priority. If voters agree, that gives him the mandate to make it happen, including exploring any trade-offs. That’s how policymaking works.

It’s also the wrong question. What we need to be asking is: how did the city so quickly become reliant on this revenue in the first place?

LTTs are notoriously unreliable sources of revenue for budgeting because they fluctuate wildly based on the health of the housing market, both in terms of the volume of transactions and the value of sales.

The market is currently experiencing a downturn and bureaucrats were already scrambling to figure out how to deal with the reduction in revenue.

Toronto budget chief Shelley Carroll said in the run-up to the 2026 budget process that home sales were “very quiet right now,” which created planning challenges. This means that now is the ideal time to eliminate the LTT.

The fact is that Toronto is already doing without a lot of land transfer tax revenue. Staff are making the tough choices to mitigate the funding implications. By removing the LTT, Toronto would simply be putting the matter to rest once and for all and getting rid of a tax that should have never been introduced in the first place.

National Post

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