Higher tax on luxury home sales would ease housing crisis

COVID-19 has dramatically reduced municipal revenues, leaving the city with a budget shortfall of $649 million


We’re in the home stretch of the 2021 budget process, with the final vote by Toronto city council set for Thursday, February 18.

This year’s budget has been a tough one. COVID-19 has dramatically reduced municipal revenues, leaving the city with a budget shortfall of $649 million. To put that in perspective, it would take a residential property tax increase of more than 20 per cent to fill the hole.

Unlike the higher levels of government, local governments lack the tax levers to respond to budget shortfalls of this magnitude, and they are not legally permitted to run deficits. The mayor and council have rightly called for the federal and provincial government to step up to support the city.

But filling the hole in the budget won’t address Toronto’s crisis of social inequality exacerbated by the pandemic.

The emergence of COVID-19 has also shone a bright light on the critical need for affordable housing.

More than 80,000 households are on the social housing waiting list. According to the Canada Mortgage and Housing Corporation, Toronto renters have the highest rates of rental arrears in the country. Many will face eviction. Emergency shelters are at or near capacity, while hundreds of people live in encampments.

Housing is a matter of human rights, public health and racial justice. Every order of government has a responsibility to do their part. But what about Toronto?

The mayor and council have an opportunity to generate much-needed revenue by increasing the Municipal Land Transfer Tax (MLTT) for luxury homes. This tax is paid by home buyers and property buyers (with an exemption for first-time home buyers) as a percentage of the value of the property, ranging from 0.5 per cent to 2.5 per cent.

An increase in the top tier of the MLTT, from 2.5 per cent to 3.5 per cent for homes valued at more than $2 million, could raise an additional $18.62 million to $26.77 million, based on figures from a recent city staff report.

With that money over the last five years, the city could have built some 700 new affordable homes (based on costs from the city’s recent modular housing project).

Some argue that no one should be expected to pay higher taxes during a pandemic. But the economic impact of COVID-19 has been anything but equal. Low-income, racialized Torontonians have been the most adversely affected by the pandemic in terms of health, income and employment. Meanwhile, Toronto’s luxury home market has done quite well, showing a 30 per cent increase in sales over the last year.

It’s true that the potential revenues from an increase to the MLTT will not solve the city’s housing crisis. A luxury tax on homes will not end homelessness. But without immediate action, deep inequities in our city will continue to grow.

Toronto city council doesn’t have all the tools at its disposal to fund critical programs, services, and infrastructure. But it does have the power to raise the MLTT rate on luxury homes, and it can decide to do so right now.

The mayor and city council are faced with many difficult decisions this year, and on February 18, they need to do their part – they need to use every tool in the toolbox to fund the solutions that will create a more livable and equitable city.

Caryl Arundel is the interim executive director at Social Planning Toronto. Neil Hetherington is the chief executive officer of the Daily Bread Food Bank.

@nowtoronto

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5 responses to “Higher tax on luxury home sales would ease housing crisis”

  1. >The mayor and council have rightly called for the federal and provincial government to step up to support the city.< Federal and Provincial taxpayers have already gifted deadbeat Toronto over a billion $$$. Time for the Mayor and councilors to actually manage Toronto's economy and make cuts and raise taxes. Even the most pro-Keynsian knows you save $$$ in the good times for the inevitable bad times, but the Mayor and his council blew every penny that was raised by ever increasing taxes, service fees, tickets and fines. The approx 10 year old Land Transfer Tax was throwing around 800billion annually to the city and every penny was blown, wasted or disappeared into black holes. Toronto the mismanaged socialist utopia is getting its comeuppance and it's time to payup and stop crying and begging for other people's $$$!!!

  2. >COVID-19 has dramatically reduced municipal revenues, leaving the city with a budget shortfall of $649 million.< The fact is this number was over a billion $$$ higher until federal and provincial taxpayers bailed the City out of its fiscal cesspool.
    Taxes in Toronto need to double and triple to feed the socialist utopian monster known as Toronto. Easy to see Toronto and Ontario, the largest nonsovereign debtor by far in the world, are on an economic crash course! Please, print trillions in fake fiat currency and save us with a bailout.

  3. Please raise land transfer taxes on luxury homes, let us be honest , they are not hurting.
    We have a good city, save it. Affordable housing, caring for the less fortunate, they need our attention. Now.

  4. I don’t like higher taxes, but if it builds affordable homes, well, so be it. I am a homeowner and my home(s) have enjoyed quite a bit of price appreciation. A couple of percentage of tax increase won’t kill me.

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