The mayor’s affordable housing advocate is pushing for more taxes on real estate as the 2020 budget process gets underway Friday.
Coun. Ana Bailao (Ward 9 Davenport), a member of Mayor John Tory’s executive as well as his appointed housing champion, says she would like to see a vacant home tax and an increased municipal land transfer tax on luxury homes in 2020 to help the city raise badly needed revenues for housing programs.
“This situation is very serious and needs urgent action and I think that we need to look at everything and anything that can assist with the situation,” Bailao told the Star.
She is backed by centrist and left-leaning councillors, who say the city still needs new revenue sources despite Tory’s proposal to raise property taxes by eight per cent over the next six years. They note that real estate-related taxes don’t require any additional permissions from the province to implement now.
Tory said Thursday he is in favour of a vacant home tax “in principle,” subject to a pending staff study, and believes it could be implemented relatively quickly. He has previously been dismissive of the municipal land transfer tax proposal.
“Council has previously directed staff to study an increase to (municipal land transfer tax) for luxury homes and no changes were recommended in the HousingTO report,” a statement from his spokesperson Don Peat said this week, referring to the city’s new 10-year housing plan.
Although council approved a motion from Councillors Joe Cressy (Ward 10 Spadina-Fort York), Brad Bradford (Ward 19 Beaches-East York) and Bailao to look at changes to the municipal land transfer tax in March, Tory shot the idea down in a TV interview the night before the vote, saying the councillors had picked “arbitrary numbers” and that it may unfairly burden homebuyers.
The proposed increase would only affect the top tier of luxury homebuyers. The councillors have proposed a rate of 3 per cent on homes valued at $3 million or more.The current top tier is 2.5 per cent for homes valued at $2 million or more.
The councillors previously estimated that a new top tier could raise $5.1 million annually, based on city data that 774 homes sold at that value in 2018. A comparable 2019 sales number has not yet been released.
A vacant home tax could look something like the one implemented in Vancouver, a city of with fewer properties. Its 1 per cent tax on the assessed value of homes deemed vacant raised $39.4 million in 2018. Vancouver also recorded a 22 per cent decrease in the number of vacant units eligible to be taxed between 2017 and 2018 after the tax was implemented.
The province gave the city the power to implement a vacant home tax in 2017.
Bailao said staff are currently working on a report to council about a possible vacant home tax that is due in February, at the same time this year’s budget is being finalized.
“I think it would be a really appropriate time to have the tax approved,” she said, with the money raised allocated to housing.
Adjusting the municipal land transfer tax doesn’t require any major administrative work, she said, and could bring in more funds that are needed. Cressy told the Star he plans to push for that change in this budget cycle.
Bradford noted staff have identified potential challenges in administering a vacant home tax, but that the city should not shy away from doing it.
“The upside and the opportunity is such, and the magnitude of the problem that’s facing us requires us to step up,” he said.
Bradford said the municipal land transfer tax is an unpredictable source of income, but given the limited number of tools the city has available it makes sense to increase the rate for top tier luxury homes.
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He agreed the revenues from both taxes should be spent on housing.
Councillor Kristyn Wong-Tam (Ward 13 Toronto Centre) also told the Star the city has to do what it can in the absence of new tools that require provincial approval, including the vacant home tax and increased tax on luxury homes.
Councillor Gary Crawford, Tory’s budget chief, said Friday’s initial budget presentation will not show a gap between what the city plans to spend and what it expects to collect in revenues.
However, he also indicated the preliminary budget will rely on funding from other levels of government — to help cover the costs of refugee services, for example — that has not yet been confirmed.
Of tax measures to be introduced, Crawford said he can’t predict what will happen.
“I respect where Coun. Bailao is coming from, but let’s let the process unfold and see where it goes,” he said.
The proposed tools, along with reintroducing the vehicle registration tax, were recently recommended by advocacy group Social Planning Toronto in a report outlining the cost of a decade of low taxes at city hall.
Today, Toronto has low residential property tax rates compared to most of the GTHA and Ottawa.
The mayor’s executive members, a group of right-wing councillors and other loyalists, give Tory the power to win most votes at council. But with voices like Bailao and Bradford in favour of the proposed tax measures, a split vote a budget time could be close.
“I’m hopeful,” Bailao said.
Those decisions won’t be finalized until February, when council as a whole gets to debate the operating budget. It will first go through several meetings, including hearing from public speakers at the budget committee. After that, Tory’s executive committee gets a chance to sign off on the package on Feb. 13, before it heads to council on Feb. 19.
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