Buying a home in Flamborough could cost you extra, if Hamilton city council goes forward with a new tax for home buyers.
On Wednesday, the city’s General Issues Committee will take a first look at other proposed revenue streams, outside of property taxes. This could mean new taxes on alcohol, cannabis and tobacco, higher parking fees for high-traffic areas in the city, and a one-time tax on new homeowners.
The municipal land transfer tax (MLTT), according to a city report, “presents Hamilton with a substantial opportunity to diversify its revenue sources and reduce dependency on property taxes.”
Ward 13 Coun. Alex Wilson said the city is far off from adopting its own land transfer tax, but is looking to Toronto for ways to bring in more revenue.
“This isn't a cooked program,” Wilson told FlamboroughToday. “[It’s] an information report that says, ‘If we wanted to do these things, here's the rough kind of breakdown of what the fees might look like based on neighbouring municipalities.’”
With a possible $100-million revenue stream for the city, Wilson said it could be a major support for Hamilton and its long list of housing crisis and infrastructure projects.
But Julie Sergi, Chair of Cornerstone Association of Realtors, says the fees could turn potential buyers away from Hamilton.
“It could impact property values because it would be less affordable to buy in Hamilton, which makes outside communities look more attractive,” she said.
How does the municipal land transfer tax work?
When buyers purchase a home, the province applies a land transfer tax, a one-time charge that is part of the closing fees. This tax is based on the price of the home that is being purchased. The charge is made when the home is transferred from one owner to another.
A municipal land transfer tax would apply a similar fee, meaning homeowners would pay two land transfer charges when buying a home.
Toronto is the only city in Ontario that has a municipal land transfer tax – something the Ontario Real Estate Association says shouldn’t be allowed.
“Modelled after Toronto's [municipal land transfer tax],” the city report reads, “a tiered tax structure would allow Hamilton to receive revenue based on property transaction values with higher rates applied to high-value transactions and lower rates reserved for more affordable properties.”
The average detached home in Flamborough costs $817,900, according to the Canadian Real Estate Association (CREA).
In the city’s report, it shows a tax rate chart from Toronto’s MLTT. Homes in the $800,000 price range are charged a 2 per cent MLTT — if a similar rate were adopted by Hamilton, Flamborough homebuyers could see an extra $16,350 on their closing costs based on the area’s average.
The cheapest home on the market in Flamborough is currently $249,888, and would have a 1 per cent MLTT, which would cost the buyer about $2,500.
On top of that, the purchaser would still be charged a similar rate by the province.
Land transfer tax could push away home buyers
Rick Kedzior, president of the Ontario Real Estate Association, said home buyers need to come up with these fees in cash to close their homes.
“One of the hardest things for first-time home buyers is they come up with enough down payment cash to buy a house,” he said, adding that another large tax is a roadblock to home ownership.
But Wilson says if the city goes forward with a municipal land transfer tax, there could be rebates for first-time home buyers.
“For example, [Toronto has] a first-time home buyer credit, which basically takes off the fee for the first $400,000 of the program,” he said.
Ward 15 Coun. Ted McMeekin wrote in a post on his website that he would only support the MLTT if first-time home buyers were exempt, and if the added tax allowed the city to freeze or reduce property taxes.
Kedzior said when Toronto first adopted the MLTT, it pushed buyers out of the city.
Sergi said the same thing could happen in Hamilton, and buyers will be pushed to nearby Brantford, Guelph, Grimsby and other municipalities. Adding the tax could also have an impact on rental stock, she said.
"It puts again an added pressure onto landlords who maybe want a second investment property or something to have as a rental. Now they're paying an extra tax on that. It doesn't make it look very affordable to purchase an investment property in Hamilton," she said.
Lack of provincial funding prompts city to look at different revenue streams
Wilson said one solution could be the province returning 50 per cent of the provincial land transfer tax back to the residents, because the issue at its core is a lack of funding for a growing list of municipal responsibilities.
“I think you'll find every municipality in Ontario is now saying the same thing. We need a new funding arrangement with the province,” Wilson said.
The city “cannot unilaterally invoke a [land transfer tax]. Permission to do so would be granted by the province of Ontario, as it was to the City of Toronto,” McMeekin wrote.
Sergi said she has heard from Premier Doug Ford, who supports turning down any attempt for a Hamilton municipal land transfer tax.
Two of the biggest financial demands for the city, Wilson said, are outdated infrastructure and the cost of the homelessness crisis. Many of the city’s recreation centres, sewer and water systems and social housing are aging out and need to be replaced.
Kedzior said for home buyers in Flamborough generally face higher realty taxes in relation to the local infrastructure needs, but the area has its own costly infrastructure projects in the works.
In Flamborough, the city is investing $47 million to update water mains and municipal wells in Waterdown, Greensville and Carlisle, with an estimated $20-million Waterdown rec centre also in the works. Construction on the Dundas Street East bridge will cost an estimated $15 million to complete and the combination police and fire hub at Parkside and Highway 6 currently has a $28-million budget.
“If we only have income from property taxes, then property taxpayers are going to be subsidizing 100 per cent of the budget,” Wilson said.
