I mean real big time scandals …
Real talk for real estate agents: Stop fighting the land transfer tax
Last Friday, Mayor Rob Ford paid a visit to the Toronto Real Estate Board. There to rattle off a speech that included his standard budget talking points, the beleaguered mayor received a standing ovation after promising — once again — to work on eliminating Toronto’s municipal land transfer tax.
That’s all it takes with the Toronto Real Estate Board, apparently. Pledge to get rid of the land transfer tax and a lot of realtors will like you.
They’ll really, really like you.
This despite the fact the land transfer tax is the main thing that has allowed both Ford and his predecessor to crow about surpluses each and every budget year.
This despite the fact that it’s hard to identify any negative impact on the real estate market since the tax was implemented in 2008. Since that time, the average price of a home sold in Toronto has risen by about 31 per cent, and 2012 just happened to be the best year on record for housing starts, with new home construction in Toronto outpacing the 905 for the first time in more than 20 years.
This despite the fact that Ford has totally failed to deliver on his campaign promise to eliminate the tax by the end of his first year in office. Ford is now saying he may be able to reduce the tax by 10 per cent for the 2014 budget year. That 10 per cent reduction, by the way, would save the average Toronto home buyer about $600 off their total purchase price. Somehow I don’t think the prospect of saving $600 is going to compel a lot of people to jump into the housing market.
This despite the fact that the land transfer tax effectively works as a tax on speculators. Yes, if you plan to buy a bunch of condos pre-construction and then flip them, the land transfer tax eats into your bottom line. But in a city with such a diverse set of budget needs, is that necessarily a bad thing?
Let’s do some math.
The land transfer tax brought in about $344.5 million in 2012. So slashing it by 10 per cent would require the city to cut back on operating expenses by about $34 million. Even if those kinds of savings were achievable without impacting city services — and there’s reason to be skeptical — I can think of about a hundred better places for city hall to spend $34 million than on an unnecessary cut to a real estate tax.
Even if you’re the type of real estate agent who scoffs at spending public money on arts or affordable housing, think about what that $34 million could do to actually make the city more attractive to potential buyers. Think about spending it on transit or parks. Because, honestly, it’s not the land transfer tax that’s gong to make all those condos hard to sell when the market cools — it’s the lack of public spaces, the impassable roads, and the streetcar that runs at 100 per cent capacity for most of the day.
If this simply must be about tax relief, then maybe focus on how the land transfer tax can stave off the need for future property tax increases. The average person will feel those savings far more than they will a cut to the land transfer tax.
But instead the real estate board has been fixated on eliminating the land transfer tax completely, even going as far as mounting an ad campaign. They’ve tried to make this about fairness, pointing out that it’s just not right that Toronto home buyers pay a tax buyers in other cities don’t pay.
But that kind of thing is standard practice. Residents pay different types of taxes depending on where they live. In Alberta, for example, they don’t pay a provincial sales tax. In Vancouver, they pay an extra gas tax. In many large American cities, they pay a municipal sales tax.
None of that has anything to do with fairness. A tax is fair when it provides revenue to effectively deliver services without restricting the economy or placing a disproportionate burden on low- and middle-income earners. In that light, Toronto’s land transfer tax can rightly be called fair.
And so, a memo to real estate agents: I like you. I’ve worked with you. I count you among my friends. But it’s time to let this go.