Most Torontonians remember Rob Ford’s promise to get rid of the land transfer tax. But over the past three years, Ford has had a hard time convincing councillors to eliminate the tax, since it provides the city with a huge chunk of relatively reliable cash. A new study seems to suggest that Ford might have been right in wanting to kill it, though for the entirely wrong reasons.
The city’s real-estate market is booming, after all, and as the average house price now hovers around $550,000, the city is cashing in. It collected approximately $350 million in land transfer taxes in 2013, almost double what the fee generated when it was first introduced in 2008. Back then, Mayor David Miller pushed for this second land transfer tax (there already is a provincial one) in order to help make up the massive shortfall in the city’s budget. Now, as many have observed, the city has become dependent on the money.
According to a new study by Altus Group Economic Consulting, however, the tax is actually hindering the supposed real-estate boom. As housing price have gone up, so too have the ancillary costs of buying a home, and the biggest culprit is the land transfer tax. The study found that the extra fees have caused a decline in home-buying transactions. Getting rid of the tax, the study says, could mean billions of dollars in new economic activity, not to mention thousands of jobs in real-estate fields.
Still, few of the mayoral candidates are willing to jeopardize that guaranteed revenue stream for potential future prosperity. Olivia Chow wants to keep the tax as is, Soknacki and Stintz want to reform it, while Ford still thinks we should cut it, despite his earlier failure to do so. But as the home-buying scene grows even more competitive—and expensive—there’s an eager audience for any candidate who might be able to tackle the land transfer tax in a sensible way.