At the end of last week, a proposal came to light regarding the creation of a new top tier of Municipal Land Transfer Tax in Toronto to fund the City’s Housing Allowance Program.
Deputy Mayor Ana Bailão, Councillor Brad Bradford and Councillor Joe Cressy will be tabling the concept at the March 27 Toronto City Council meeting.
Currently, the highest MLTT tier is “Over $2 million,” which has a 2.5% MLTT rate. The new proposal wants to create a new top tier in an effort to fund the Housing Allowance Program, which services more than 5,000 Torontonians, providing $250-$600 a month to address homelessness and eviction prevention. Apparently, every $1 million extra in funding would equal 200 new households receiving a housing allowance.
"The housing system is interconnected and we need to utilize a wide range of tools to ensure that all Torontonians have access to a safe, clean and affordable place to call home," says Bailão. "Housing Allowances are the most effective tool we can use right away to help people out of the shelter system and into stable, supportive housing so they can reach their goals and dreams."
The Deputy Mayor and Councillors behind the proposal issued a report that said that the 2017 introduction of the $2 million-plus tier did not impact real estate transactions at this price point. We believe they’re implying that the introduction of a new top tier would not impact potential transactions.
According to the report, residential transactions of $3 million-plus have increased 353% since 2010. The proposal is to increase the MLTT rate to 3% for $3 million-plus sales. Two other scenarios are also proposed, including an MLTT rate of 3.5% or 4% for $4 million-plus transactions. If implemented, the 3% and 4% MLTT would fund housing allowances for approximately 2,200 more households in need of assistance.
The Toronto Real Estate Board was quick to voice concern, almost immediately issuing a press release. “We have always told City Council that the Municipal Land Transfer Tax is a bad way to generate revenue, and that became obvious last year and during this year’s budget process,” says John DiMichele, TREB’s Chief Executive Officer. “Housing our most vulnerable citizens should be done with stable and predictable revenue. As noted in the Councillors’ motion, it is anticipated that housing benefits will be introduced through the Federal National Housing Strategy. This is a much more appropriate and stable way to fund these needs.”
We somewhat understand TREB’s concern because MLTT revenue fell short in 2018, coming in $100 million lower than expected due to fewer sales. In 2019, MLTT is budgeted to bring in nearly $730 million.
“When will it end? The Municipal Land Transfer Tax is not a gift that keeps on giving,” adds Von Palmer, TREB’s Chief Communications and Government Affairs Officer. “Unfortunately, that seems to be the way it is viewed at City Hall. City Council has been repeatedly advised by City staff that they need to rely on this tax less, not more. Homebuyers are already paying more than their fair share to fund City services.”
At the same time, we also feel like those spending more than $3 million or $4 million on a home could afford to be taxed an extra 1% if it meant helping thousands of families. "We must look at new funding sources to ensure no one in Toronto is left behind," says Cressy. "By creating a new tier of the Municipal Land Transfer Tax, we could create hundreds of new Housing Allowances for those who need a place to call home, and take critical steps to addressing homelessness in our city."
It will be interesting to see what Council decides on March 27.