What to know
- Toronto Mayor Olivia Chow proposes raising the Luxury Homes Tax on properties valued at $3 million or more to fund city programs like school meals and TTC fares.
- The proposed rates would increase from 3.5–7.5% to 4.4–8.6% for luxury homes, depending on value.
- Realtors warn the tax could disrupt the housing market, pushing move-up buyers to delay purchases and increasing competition in mid-market and first-time buyer segments.
- The Toronto Regional Real Estate Board suggests expanding the first-time homebuyer rebate instead of raising the luxury tax to help affordability.
As Toronto Mayor Olivia Chow proposes raising the luxury homes tax to address the city’s deepening affordability crisis, realtors warn the move could end up hurting all homebuyers, not just the wealthy.
Chow announced the proposal earlier this week, saying the move will help fund key affordability initiatives such as the school food program and maintaining current TTC fares.
The Luxury Homes Tax is a levy for homebuyers purchasing a property in the city valued at $3 million or more.
In 2023, the city established the rates for these properties, which start at 3.5 per cent for homes valued between $3 and $4 million, up to 7.5 per cent for homes valued at $7 million or more.
Chow is proposing an increase to the tax ranging from 0.90 per cent to 1.10 per cent. This would include a 4.40 per cent rate for $3-4 million homes and 8.60 per cent for homes valued at $7 million or more. The proposal is set to head to the Executive Committee next week.
CHANGES COULD HAVE CRIPPLING EFFECT: REALTOR
Local realtors warn these changes could have a crippling effect on buyers and the market, including causing some buyers to adjust the timing of their purchases.
“This proposal creates uncertainty. Some buyers will accelerate a purchase to avoid higher costs, while others step back to see how the market reacts,” Bethany King, owner of King Realty Co, said in a statement to Now Toronto.
“Anything that shrinks the buyer pool increases days on market and forces more negotiation. We already operate in a discretionary segment, and adding another tax makes the luxury market stickier, not stronger.”
King adds that in Toronto’s current market, $3 million does not always represent “luxury” or a “mansion” which means move-up buyers and single-family homes will be impacted.
“This pushes many move-up buyers to delay their purchase, stay under the $3 million mark, or consider leaving Toronto altogether. When they push down, they displace buyers in the $1.5 to $2.5 million segment, creating a negative cascading effect,” she said.
According to King, if the $3 million market stalls, most markets below it will also slow, which could lock out first-time homebuyers waiting for homes. The result, she says, is stalled inventory at the higher end, increased competition in the mid-market, and intensified pressure in the first-time buyer segment.
The Toronto Regional Real Estate Board agrees, saying the move could suppress housing supply.
“This leaves higher-income buyers with a greater incentive to compete with first-time homebuyers and younger residents for more affordable homes,” the board said in a news release.
Rather than increasing the tax, the board is calling on the city to boost the Municipal Land Transfer Tax first-time homebuyer rebate, which hasn’t been adjusted since 2016.
“Making life more affordable for the people of Toronto should start by giving hope to the thousands of young people and families struggling to enter the city’s ownership market. We urge City Council to reject this latest proposed increase,” the board said.
