Toronto Proposes Luxury Home Tax That Could Bring $18.7 Billion in Revenue

Toronto is looking at exploring luxury home tax which could result in $18.7 billion additional revenue, should the City Council approve.

The reason for this implementation is to have a better balance of the books at City Hall, along with generating additional resources to ensure that the cities needs like proper transportation, affordable housing and transit are all taken care of.

As of now, luxury properties that are priced at $2 million and above are charged with a provincial fee along with municipal land transfer rate of 2.5%. If this rate was hiked by even 1%, it would generate the required additional revenue.

If the same threshold was levied on properties worth $3 million and above, the revenue generated would be an additional $6.4 million.

The City staff shared that these new transfer tax tiers could have negative yet highly transactional impact on the housing market in Toronto. The increased rates could affect the liquidity of real estate and luxury homes in particular.

This could also impact current owners from up-sizing to low-end luxury homes that will tighten the supply for mid-value properties.

Some specialist also believe that while the city might benefit from this tax, it might steer away potential buyers from investing in bigger homes.

This proposed tax is similar to what was imposed in Vancouver that resulted in negative consequences for agents as well as investors and buyers.

Taxes are often seen as the only solution to generate income for the government. However, levying this extra luxury home tax cannot be a permanent solution for Toronto’s housing market.

The government should look at practicing more sustainable solutions that hold no negative consequence. If approved, the luxury home tax will take at least two months to be implemented.