Why Kathleen Wynne could offer homebuyers more than 'small' fixes amid sky-rocketing prices
Thanks to real estate boom, Ontario now rakes in more than $2B annually from the land transfer tax
Ontario's Finance Minister Charles Sousa is going to offer something "small" to help first-time home-buyers when he delivers his fall economic statement this afternoon.
But taking a look at how the province has been raking in more and more revenue by taxing sky-high house prices in a number of Ontario's cities, you'd likely conclude he could afford to offer something a little bigger.
- Wynne promises 'small change' to help first-time home buyers
- Ontario to outline plans to deal with rising house prices
The province charges Land Transfer Tax (PLTT) on every purchase of residential real estate in Ontario, whether there's "land" involved or not.
With property values exploding in Toronto, Hamilton and elsewhere, here's how home prices have helped fill Liberal government coffers in recent years:
Ontario Premier Kathleen Wynne's government now brings in more than $2 billion annually by taxing home-buyers. That's more than double the revenue it earned just six years ago.
Keep in mind it's the buyer who pays the land transfer tax, not the seller, so those profiting off the real-estate boom don't feel that pain.
On the average house in the GTA, now priced at $762,975, the province charges $11,734 in tax.
Today's fall economic statement will include "measures to address housing affordability," Sousa indicated in a speech last week.
"We know that it's becoming more difficult for first-time home-buyers, so we're looking at ways to address it," he said.
But Wynne moved quickly to dampen expectations about how significant those measures will be.
"What we'll be announcing in the fall economic statement on Monday is a small change," she told reporters Thursday. "I don't think that anyone should expect a radical shift in the way that the housing market works in Ontario.
"Our concern has been that there is a real challenge for first-time home-buyers to get into the market," Wynne added. "We can make some small adjustments that will help on that."
The "small adjustment" could be to boost the existing rebate on the land transfer tax for first-time home-buyers.
The maximum rebate is currently $2,000, which is the amount the province collects on a home costing just $227,500. There's little inventory in Toronto for that price, beyond small condos in older buildings well outside the downtown core.
The Ontario Real Estate Association is calling on the government to exempt first-time home-buyers from the tax completely. (Though concern from the real estate agents' lobby group about the impact of a two-per-cent tax might be greeted with less skepticism if agents were also willing to reduce their commission, which is typically five per cent split between the buying and selling agent.)
Still, the government could help to make home-buying less expensive for everyone by reducing land transfer tax rates to reflect the reality of current home prices. The rates — and their brackets — haven't budged since 1989:
Those rates were set at a time when someone who could afford to pay more than $400,000 for a home would likely be able to easily afford that tax.
A $400,000 home in most parts of Ontario today is by no means a luxury property. The average home price in the Toronto area has risen every single year for the past 20 years, yet the land transfer tax brackets remain the same.
Progressive Conservative finance critic Vic Fedeli argues that anything the Liberals announce to help first-time home-buyers is really designed to distract people from the state of the government's balance sheet.
If today's moves end up doing little to address the affordability crunch, Wynne has left the door open for further changes. She promised last week to "continue to talk about whether there's more that we need to do."