REALTORS(R) Raise Concerns Over Toronto "Home-buying Tax"



    TORONTO, March 21 /CNW/ - In an open letter to Toronto Mayor David
Miller, the Toronto Real Estate Board (TREB) has raised concerns about a
possible home-buying tax in Toronto.
    TREB's letter provided Mayor David Miller with REALTORS'(R) initial input
to a City discussion paper on potential new revenue sources. Of particular
concern to TREB is the possibility of a Toronto land transfer tax, which would
be levied on top of the existing provincial land transfer tax, meaning that
Toronto homebuyers would be faced with paying this type of tax twice for the
same transaction.
    "Let's call a spade a spade. A land transfer tax is a home-buying tax. It
is a tax charged directly to homebuyers when they purchase a property, which
is usually intended to offset costs for providing services directly related to
real estate transactions. If the City intends to charge a land transfer tax
just to raise additional revenue for general municipal services, is it fair to
expect homebuyers to pay for services that the whole community benefits
from?", said Dorothy Mason, President of the Toronto Real Estate Board.
    "If the City adopts a land transfer tax, Toronto homebuyers will be faced
with a double whammy of land transfer taxes - a municipal land transfer tax
and a provincial land transfer tax," added Mason.
    The provincial government already charges a land transfer tax on property
transactions. For the average Toronto home, according to TREB's statistics,
the provincial land transfer tax payable is approximately $4200.
    "If the City moves ahead with a second land transfer tax of 0.5%, as is
being considered, average Toronto homebuyers could be faced with paying almost
$1900 on top of the $4200 that they already have to pay for the existing
provincial land transfer tax, money that could be spent on other expenses when
purchasing a home such as appliances. That's an additional 45% in land
transfer tax. Even a 0.1% Toronto land transfer tax would represent almost a
10% increase in land transfer taxes. Also, with total closing costs (e.g.
legal fees, land transfer tax) usually around 1.5% of a property's selling
price, a 0.5% Toronto land transfer tax would represent a 33% increase in
closing costs", said Mason.
    TREB's letter to Mayor Miller outlined specific concerns about the impact
that a second land transfer tax would have for the City.
    "Mayor Miller and all of City Council should realize that forcing
homebuyers to pay a second land transfer tax will have implications for the
City. It will make Toronto housing less affordable, and encourage homebuyers
to choose to live outside of the City, where they only have to pay the land
transfer tax once. This could mean more commuting, more traffic, and
environmental impacts, like smog, for the GTA", said Mason.
    A copy of the open letter to Mayor Miller follows.

    Toronto REALTORS(R) are passionate about their work. They adhere to a
strict code of ethics and share a state-of-the-art Multiple Listing Service
designed exclusively for REALTORS(R). Serving more than 25,000 REALTORS(R)
throughout the Greater Toronto Area, the Toronto Real Estate Board is Canada's
largest real estate board.


    
             Open Letter to Mayor David Miller, City of Toronto
    

    March 21, 2007

    His Worship Mayor David Miller
    City of Toronto
    Toronto City Hall
    100 Queen Street West
    Toronto, Ontario
    M5H 2N2

    Open letter regarding potential new home buying tax

    Dear Mayor Miller,

    The Toronto Real Estate Board's (TREB) 25,000 REALTOR(R) members are
    concerned about possible new municipal taxes that homeowners could face
    in the City of Toronto. Specifically, a potential Toronto land transfer
    tax, levied on top of the existing provincial land transfer tax, could
    have serious consequences.

    Double Whammy

    It is important to point out that a Toronto land transfer tax would be
    levied on top of the existing provincial land transfer tax. Put another
    way, this would be like telling a consumer that they have to pay the GST
    twice every time they go to the cash register.

    As the City's discussion paper notes, there is limited experience with
    other municipalities that charge a land transfer tax. However, the City's
    discussion paper fails to point out that in some of these municipalities
    there is no provincial/state land transfer tax, meaning that the
    homebuyer is not faced with a double whammy of land transfer taxes, as is
    being considered in Toronto.

    Significant Cost

    The existing provincial land transfer tax is already a heavy burden for
    homebuyers and a Toronto land transfer tax would exacerbate this. For
    example, the average homebuyer in Toronto already has to pay a provincial
    land transfer tax of approximately $4,200 (on the averaged priced Toronto
    home in 2006 based on TREB MLS(R) statistics), in full at the time of
    closing. This means that a Toronto land transfer tax of 0.5%, as noted in
    the City's discussion paper, would mean close to an additional $1900 in
    land transfer taxes for an average Toronto homebuyer, which represents an
    additional 45% of land transfer taxes. Even a Toronto land transfer tax
    of 0.1% would represent close to an additional $400 (a 10% increase) for
    the average Toronto homebuyer - a significant amount of money at a time
    when most people can least afford it because of the numerous other
    expenses (appliances, furniture, renovations) that come with home
    ownership.

    Land Transfer Tax = Home Buying Tax

    Make no mistake, a second land transfer tax is nothing short of a home
    buying tax. Land transfer taxes are payable, in full, by a homebuyer at
    the closing of a property transaction and can represent one of the
    biggest closing costs that homebuyers must deal with. Generally, closing
    costs equal approximately 1.5% of the purchase price of a property. If
    the City implements a second land transfer tax of 0.5%, as considered by
    the City's discussion paper, this represents a 33% increase in closing
    costs for Toronto homebuyers. Even a 0.1% Toronto land transfer tax would
    represent almost a 10% increase in land transfer taxes on the average
    home. At a time when the City's population growth is being vastly
    outpaced by surrounding areas, what kind of message does this type of
    home buying tax send?

    Benefit for Cost?

    Taxpayers have the right to know what benefits they receive from taxes.
    What added services, from the City, can homebuyers expect for paying a
    second land transfer tax? If this tax is intended simply to generate
    general revenue, then the City is discriminating against homebuyers and
    asking them to fund services that existing residents will benefit from.
    Property taxes, paid by all, are intended to pay for services that
    everyone benefits from.

    "What's in a name?"

    However, it is no secret that property taxes are overburdened. This is
    part of the City's rationale for considering new taxes. Unfortunately,
    there is little difference between a property tax and a land transfer
    tax. Both are taxes on home ownership; both are calculated based on a
    property's value; and both impact affordability. We support the City in
    trying to avoid property tax increases, but isn't a second land transfer
    tax just another way to raise taxes on property?

    Don't Put the Cart Before the Horse

    TREB has been a vocal supporter of efforts to convince the provincial and
    federal governments to provide municipalities with adequate, predictable,
    and sustainable funding from existing tax sources. Furthermore, TREB has
    joined municipalities in calling for the uploading of social costs, such
    as disability and drug benefits, that should not be funded by property
    taxes. We will continue to support these efforts and we strongly believe
    that these critical issues must be resolved before Toronto taxpayers are
    expected to pay any new taxes, let alone a duplicate of one that they are
    already paying at the provincial level.

    Contradicts Other City Objectives and Goals

    The City's Discussion Paper indicates that requiring homebuyers in
    Toronto to pay a second land transfer tax would have a "neutral policy
    impact". Unfortunately, we believe that there is a distinct possibility
    for substantial impacts on various City policies, objectives, and goals.

    Environmental Impact: More Traffic, More Smog

    Under the new City of Toronto Act and the new Municipal Act, Toronto is
    the only Ontario municipality with the authority to levy a local land
    transfer tax on top of the existing provincial land transfer tax. This
    means that, if Toronto levies a second land transfer tax, the City would
    be creating a financial incentive for homebuyers to choose to buy a
    property outside of Toronto's borders. Recent census data already
    demonstrates that Toronto is growing at a much slower rate than
    surrounding municipalities; adding additional costs in Toronto will only
    exacerbate this trend, meaning more urban sprawl, which means more
    commuting, more traffic and more smog.

    Affordability and Intensification

    The average price of a re-sale home in Toronto in 2006 was approximately
    $378,000. This makes Toronto one of the most expensive cities in the
    country to live in. As noted above, a second land transfer tax could add
    considerable costs for homebuyers. Any increase will reduce Toronto's
    affordability, making it more difficult to attract new residents and
    achieve the intensification goals that the City has laid out in its
    Official Plan.

    Economic Impact

    According to a study conducted by Clayton Research for the Canadian Real
    Estate Association, each re-sale housing transaction in Ontario generates
    approximately $27,000 in spin-off spending for things like furniture,
    appliances, renovations, etc. In recent years, this means that re-sale
    real estate transactions have contributed more than $2 billion per year
    to Toronto's economy. Any impact on Toronto's real estate market, from a
    second land transfer tax, will impact the overall economy.

    Moving Forward: Adequate Consultation

    I hope you find our views on this issue helpful. This is an unprecedented
    initiative that requires serious and lengthy public consultations, which
    we look forward to participating in. As such, we would appreciate an
    opportunity to meet with you to discuss this issue further.

    Yours truly,


    Dorothy Mason
    President

    
    c.c.  Toronto City Council
          Shirley Hoy, City Manager, City of Toronto
          Joe Pennachetti, Deputy City Manager and Chief Financial Officer,
          City of Toronto
          Brian Walker, President, Ontario Real Estate Association
    





For further information:

For further information: Wendy Craven, Director, Public Relations,
Toronto Real Estate Board, Office: (416) 443-8159, 24-Hour Cell: (416)
277-7390, Email: wcraven@trebnet.com

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