The City of Toronto Approves New Housing Taxes and Strategies to Confront its Funding Shortfall

By Mirjana (Mira) Markovic

On September 6, 2023, the City of Toronto (“City”) approved a new long-term financial plan outlining multiple new housing-related revenue strategies in order to facilitate the shortfall budget for 2024 and for the next ten years. One of the major changes that stems from this approval is the new graduated Municipal Land Transfer Tax (“MLTT”) rate for residential properties that fall under the category of “high-value” properties, valued at $3 million and above.

Effective January 1, 2024, these new municipal tax rates shall be applicable and payable by individuals who purchase properties in the City in addition to the Provincial Land Transfer Tax. Below is a brief outline of the new tax structure which will apply based on the property value:

• properties up to $4 million will be taxed at 3.5%;
• properties up to $5 million will be taxed at 4.5%;
• properties up to $10 million will be taxed at 5.5%;
• properties up to $20 million will be taxed at 6.5%; and
• properties exceeding $20 million will be taxed at 7.5%.

The initial MLTT came into effect on February 1, 2008. As mentioned above, such a tax structure is applicable to the purchase of properties in the City in addition to the Provincial Land Transfer Tax. For properties under $4 million, the MLTT remains taxable using the following rates:

• properties up to and including $55,000.00 are taxed at 0.5%;
• properties between $55,000.01 to $250,000.00 are taxed at 1.0%;
• properties between $250,000.01 to $400,000.00 are taxed at 1.5%;
• properties between $400,000.01 to $2 million are taxed at 2.0%; and
• properties that exceed $2 million are taxed at 2.5%.

The prevailing financial plan will ensure that the MLTT on “high-value” properties is paid accordingly and that such properties are assigned their own category of taxation.

The City’s financial plan is further considering the possibility of increasing the Vacant Home Tax rate from 1% to 3%, taking the same step as Vancouver, which raised its version of the Vacant Home Tax rate to 3% in 2021. Additionally, the City is considering introducing a foreign buyer land transfer tax, an emissions performance charge for buildings, and an additional land transfer tax for individuals who have purchased multiple properties within the City.

This appears to be yet a further effort by the City to combat the housing crisis in Ontario. In the meantime, the City continues to evaluate the proper steps to take in the future.

I hope that this article has provided you with some helpful information. If you have any questions, please do not hesitate to contact me at mira@sorbaralaw.com.