Editor's Inbox: More on Toronto's New Land Transfer Tax, HomeOwner's Energy Audits

Urmi in Toronto Real Estate News 

Ever since I learned that developers threw in their lot with Mayor Miller, who led Toronto City Council in voting for new taxes on Monday (read Rachel's first-hand account), I have been obsessed with a single thought: "what's in it for them?"  While news coverage has detailed the hows, it hasn't elucidated on all the whys.

Now, I don't believe that developers are heinous beings - just rational economic creatures.  (That being said, I am tempted to revisit the 'heinous' angle whether I spot those tepid turquoise condos that seem to languish in sprawlburbia, sustained only by the dream of retirement in Florida.) My confusion stems from the fact that Monday's tax 'comprise' extended the first-time home buyers exemption, originally proposed for new construction purchases, to include resale purchases.  This is how the tax is being reported on the City's website, with more details to be provided at the Executive Committee meeting on October 29th. This compromise seems to reduce the advantage that the house building industry might have enjoyed.  Plus, a new tax on land transfer means more tax on the industry's primary input, no? 

Derek Raymaker, writing in yesterday's Globe, suggests one reason for the builders' acquiescence - satiation.  He reminds us that the $2,000 rebate offered to first-time buyers purchasing new construction (under the provincial land transfer tax scheme) was the result of strong industry lobbying.

Even with a break for first-time HomeBuyers, the City's new tax move could undermine the planning vision that so many of us were just getting into - high-density, compact, green core living (read my previous post on this subject). Answering his own question - "Will Toronto's new tax fuel 905 sprawl?" - Raymaker suggests that we might see the GTA revert to type thanks to a shift in industry and consumer incentives. Here is his take on consumer effects:

One [effect of the new tax] is that young families on their second or third purchase looking to repatriate back to Toronto from the affordable suburbs aren't going to bother at this point.

If they've been single-detached homeowners in Mississauga, Richmond Hill or Pickering for the last five years, they will have probably racked up a 20-to-30-per-cent appreciation in the value of their home.

That's a lot of equity, but considering the elevated cost of a similar house in most pockets of Toronto, these buyers would have to have put a big dent in their current mortgage to make the move worth it


Tract housing subdivisions in the outer suburbs, such as Aurora, Newmarket and Milton, are likely to see an increase in buyer interest thanks to the tax — namely from those who want to avoid it.

After assessing a similar industry shift, Raymaker ends with these words:

Could it be that Toronto council's tax-gouging ways — spurred by the do-goodery of the left-wing majority — will inadvertently give one last gasp of oxygen to the tract-housing developments that have scarred a wide swatch of the 905 region since the 1960s?

This forecast is dismaying, but it is early days yet.  We'll need to measure the impact of this tax over time.


Hot on the heels of Jesse's second post on making your home eco-friendly, the Globe discusses energy audits in "This drafty old house."  Happy footprint reducing.

Urmi Desai is an economic analyst and a freelance writer specializing in urban issues.  She is editor of the Move Smartly blog.

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