TRREB Urges Toronto To Move Forward With LTT Relief For First-Time Buyers

Photo by Tierra Mallorca on Unsplash

‘New Entrants Are Increasingly Being Priced Out Of Toronto’s Real Estate Market & Need Help’

TORONTO:  The Toronto Regional Real Estate Board (TRREB) is calling on the City of Toronto’s Executive Committee to move ahead with long-needed adjustments to the Municipal Land Transfer Tax (MLTT) First-Time Home Buyer Rebate.

“First-time home buyers have been unfairly penalized by the MLTT for years. Adjustments to the MLTT first-time buyer rebate are long overdue,” said Michael Collins, TRREB President.

The average price of a residential property in the City of Toronto at the start of 2008, when the MLTT was first implemented, was $415,000, and the MLTT first-time buyer rebate was allowed up to a maximum of a $400,000 home, meaning that first-time buyers were almost completely exempt from paying any MLTT, as was City Council’s intention.

The average price of a City of Toronto residential property is currently $881,000, and the MLTT first-time buyer rebate is still only allowed to a maximum of a $400,000 property. This means that a first-time buyer purchasing an average priced property today would pay $9,620 in MLTT, on top of about $10,000 of Provincial Land Transfer Tax (PLTT), for a total of about $20,000 in land transfer taxes, which must be paid up front on closing of the real estate transaction.

“Clearly, City Council’s intention of providing relief for first-time home buyers, up to the average priced property, is no longer being met,” added Collins.

Not only are first-time buyers not being given the relief that was intended by City Council, they are being forced to pay MLTT at the highest rates, even if they purchase a below average priced home. This is because the MLTT rate structure is such that the highest rates kick in starting on homes priced at only $400,000, which is 55% below the current average price. As noted by the City staff report being considered by the Executive Committee, two-thirds of first-time home buyers purchase homes priced between $400,000 and $800,000, well below today’s average home price in Toronto.

“The City is essentially forcing people, including first-time buyers, purchasing BELOW average priced properties to pay the highest MLTT rates. This is simply not progressive or fair,” said John DiMichele, TRREB Chief Executive Officer.

The City staff report, and TRREB survey research (conducted by Ipsos Public Affairs), show that the number of first-time buyers entering the real estate market has been declining significantly in recent years. TRREB believes that this is largely because of affordability issues.

“First-time buyers are increasingly being priced out of Toronto’s real estate market and the Municipal Land Transfer Tax has exacerbated this. It is time to make adjustments to the MLTT rebate for first-time buyers, so that they receive the relief that was always intended by City Council,” added DiMichele.

TRREB has provided its detailed written input to the City’s Executive Committee, and will be monitoring the City’s actions going forward. TREBB said Indexation of thresholds and caps is critical to prevent the current situation from occurring again in the future and to avoid the possibility of many first-time buyers not qualifying for any rebates.

▪ With regard to the consideration of a price-point cap at which MLTT rebates would not be available, if this route is chosen by City Council, TRREB strongly believes that the cap should not be set any lower than the current City of Toronto average home price, and that it should be indexed with inflation (based on the MLS® HPI Composite Benchmark for the City of Toronto) going forward.

• With regard to a potential new threshold for the rebate, TRREB recommends that this be set at the current average home price in the City, as was done by Council when the MLTT was first implemented. It is recommended that this threshold be indexed with inflation (based on the MLS® HPI Composite Benchmark for Toronto, going forward.