Toronto imposes a municipal land transfer tax on homebuyers in addition to the provincial land transfer tax, making it one of the few Canadian cities to levy such a charge on property purchases. Introduced in 2008, the municipal tax applies to buyers at rates varying by property value, resulting in significant costs for many homeowners. For example, a detached home priced at roughly $1.56 million would incur a combined land transfer tax of approximately $55,470, split evenly between the city and Ontario.
The tax has come under scrutiny amid a cooling housing market, with the Toronto Regional Real Estate Board (TRREB) reporting a 9% decrease in home sales year over year in September. Critics argue that the tax discourages mobility by adding a substantial financial barrier to buying and selling homes. TRREB CEO John DiMichele called on governments to reduce impediments to homeownership, including Toronto’s municipal land transfer tax, warning against its potential expansion to other jurisdictions.
The tax has become a focal point in the ongoing municipal election. Mayoral candidate Brad Bradford pledged to eliminate the city portion of the tax on principal residences valued below $1.1 million starting in 2025, a move he described as the largest affordability measure in the election. He estimated this exemption would cost the city about $300 million annually.
In contrast, Mayor Olivia Chow and city council raised the tax rates for luxury properties during their current term. The municipal land transfer tax increased from 3.5% to 4.4% on homes priced between $3 million and $4 million, and from 7.5% to 8.6% for properties exceeding $20 million. Chow defended the hike, stating that buyers of high-end homes should bear a greater share of the tax burden.
A study by the C.D. Howe Institute conducted five years ago, before the tax was raised, warned of the economic drawbacks linked to the land transfer tax. The institute highlighted that unlike property taxes, which correlate with municipal services, land transfer taxes are not directly tied to service costs and tend to reduce the frequency of housing transactions. The revenue from such taxes is also subject to volatility, surging during housing booms and falling sharply during downturns.
Jack Mintz, a senior fellow with the C.D. Howe Institute and co-author of the study, remarked on the increasing global prevalence of real estate transfer taxes despite their economic inefficiencies. He suggested that property taxes might be a more straightforward and economically sound means of generating revenue.
Mintz also noted complications when the land transfer tax applies to commercial real estate, citing notable transactions such as the $1.27 billion sale of Scotia Plaza and Loblaw Cos. Ltd.’s 2013 real estate investment trust offering. These deals often structure ownership transfers in ways that avoid triggering the tax, such as changing trust beneficiaries rather than conducting outright sales.
Economist Mike Moffatt, founding director of the Missing Middle Initiative, acknowledged that removing the land transfer tax alone would not resolve broader issues in Toronto’s housing market, particularly within the condominium sector. However, he argued that eliminating the tax would encourage homeowners to move into homes better suited to their needs, thus improving the overall allocation of housing stock. Originally designed to cover the administrative costs of property registration, the land transfer tax has evolved since the 1980s into a significant revenue source for municipal governments, contributing to ongoing debate about its effectiveness and fairness.