In an effort to find new revenue streams, the City of Toronto is looking at raising the rate of its Municipal Land Transfer Tax (MLTT) on home sales.
The proposed hike would add an additional $750 in closing costs to the average home, and would add an estimated $100 million to city revenues annually.
Toronto is unique among Canadian cities in that it is the only one that charges a land transfer tax on real estate transactions. This is on top of the provincial land transfer tax.
The city started charging MLTT on sales effective February 1, 2008. The tax is calculated on a graduating scale. The proposal would increase the percentage charged on values between $55,000.01 and $400,000 to 1.5%. At current rates, on a home valued at $500,000, the MLTT is $5,725. That’s the example cited on the City of Toronto’s website. But given that the average price for a Toronto home currently exceeds $700,000, most people pay more than that.
The tax on an “average” priced detached home in the city – $1.3 million as of November – is $21,725, plus an additional $22,475 in provincial land transfer tax fees.
The Ontario Real Estate Association (OREA) recently released a statement calling the proposed increase, “a tax grab, pure and simple.”
In the statement, OREA’s CEO-designate Tim Hudak, emphasized the impact on first-time homebuyers.
“Toronto home buyers don't need a tax hike – they already pay two land transfer taxes. City Council needs to make housing more affordable for young people, not less.”
This echoes an earlier statement issued by the Toronto Real Estate Board that said, “These proposed changes will increase costs for all Toronto home buyers, but impact first-time buyers the most.”
On the upside, the provincial government recently announced that first-time homebuyers will be able to claim a rebate of up to $4,000 on their provincial land-transfer tax (an increase from the previous $2,000 rebate) as of January 1, 2017. So any potential first-time buyers out there might want to take December off to focus on the holidays, then close the deal in the new year.