The municipal land transfer tax (MLTT) in Toronto is responsible for a massive loss of economic activity and a corresponding loss of thousands of jobs, according to new research by the Ontario Real Estate Association (OREA).
The negative impact of the tax includes: a loss of 38,278 resale home transactions; a loss of $2.3 billion in economic activity; a reduction of $1.2 billion in GDP; a loss of 14,934 full-time jobs; and a loss of $772 million in wages and salaries. The economic losses incurred by the city from the time the tax was imposed in 2008 until 2013 are summarized in a report commissioned by OREA. The study, Economic Implications of the Municipal Land Transfer Tax in Toronto, was conducted by Altus Group Economic Consulting.
“The MLTT is bad for our economy,” says Costa Poulopoulos, OREA president. “For one, it kills jobs. With an unemployment rate worse than the national rate and even that of the province as a whole, the City of Toronto could have used those jobs. It also adds to household debt and pushes the dream of home ownership even further away.”
The study shows the MLTT has cost Toronto billions in the past five years – significantly more than the annual average $270 million in revenue the city collected since 2008. The MLTT applies to purchases of Toronto properties, over and above to the provincial land transfer tax. By increasing the total expense associated with housing transactions, the tax makes buying a home in Toronto more costly. As a result, a significant number of housing transactions within Toronto did not take place, which has in turn affected Toronto’s economy.
Resale housing transactions across Ontario generate significant economic activity, including fees to professionals such as lawyers, appraisers, and REALTORS®. In addition, home buyers often purchase new appliances or furniture and often undertake renovations that employ tradespeople.
“This research proves that the MLTT is doing more harm than good where our economy is concerned,” says Poulopoulos. “It gets in the way of the economic spinoff that occurs when homes are purchased. It should be repealed in Toronto and it should never be endorsed by the provincial government for any other municipality in this province.”
By repealing the MLTT, Toronto could increase the number of housing sales by an estimated 32,216 units over the next five years, resulting in the following economic benefits for Toronto: an additional $1.9 billion in economic activity; an increase of $990 million in GDP; the creation of 12,570 new full time jobs; and the addition of $650 million in wages and salaries.