The City of Toronto's Executive Committee will be meeting to consider a report that calls for providing first-time homebuyers with greater relief from the Municipal Land Transfer Tax (MLTT), including increasing the maximum eligibility threshold of $400,000 to reflect increased home prices in Toronto.
As the City prepares to review the report, the Toronto Regional Real Estate Board (TRREB) is calling on the Committee to move ahead with long-needed adjustments to the MLTT First-Time Home Buyer Rebate.
“First-time home buyers have been unfairly penalized by the MLTT for years. Adjustments to the MLTT first-time buyer rebate are long overdue,” said Michael Collins, TRREB President.
The average price of a residential property in the City of Toronto at the start of 2008, when the MLTT was first implemented, was $415,000, and the MLTT first-time buyer rebate was allowed up to a maximum of a $400,000 home, meaning that first-time buyers were almost completely exempt from paying any MLTT, as was City Council’s intention.
The average price of a City of Toronto residential property is currently $881,000, and the MLTT first-time buyer rebate is still only allowed to a maximum of a $400,000 property, according to TRREB.
This means that a first-time buyer purchasing an average priced property today would pay $9,620 in MLTT, on top of about $10,000 of Provincial Land Transfer Tax (PLTT), for a total of approximately $20,000 in land transfer taxes, which must be paid upfront on the closing of the real estate transaction.
“Clearly, City Council’s intention of providing relief for first-time homebuyers, up to the average priced property, is no longer being met,” added Collins.
According to TRREB, not only are first-time buyers not being given the relief that was intended by City Council, they are being forced to pay MLTT at the highest rates, even if they purchase a below-average priced home.
TRREB explains this is because the MLTT rate structure is such that the highest rates kick in starting on homes priced at $400,000, which is 55% below the current average price.
As noted by the City staff report that's being considered by the Executive Committee, two-thirds of first-time homebuyers purchase homes priced between $400,000 and $800,000, which is well below today’s average home price in Toronto.
“The City is essentially forcing people, including first-time buyers, purchasing BELOW average-priced properties to pay the highest MLTT rates. This is simply not progressive or fair,” said John DiMichele, TRREB Chief Executive Officer.
The City staff report, and TRREB survey research (conducted by Ipsos Public Affairs), show that the number of first-time buyers entering the real estate market has been declining significantly in recent years. TRREB believes that this is largely because of affordability issues.
“First-time buyers are increasingly being priced out of Toronto’s real estate market and the Municipal Land Transfer Tax has exacerbated this. It is time to make adjustments to the MLTT rebate for first-time buyers, so that they receive the relief that was always intended by City Council,” added DiMichele.
The report was initially set to be presented in April, but given unexpected delays brought on by the pandemic, the report is just now set to be presented to the Committee.