Toronto Condo and Real Estate Blog

Councillors endorse mayor’s controversial land-transfer and vehicle licensing fees 26 to 19 after long bitter debate

Jeff Gray - Globe and Mail

TORONTO — City council voted 26-19 to endorse Mayor David Miller’s two controversial new taxes - one on land transfers and the other on vehicle registrations - drawing to a close a months-long political drama at city hall.

Yesterday’s vote was crucial to Mr. Miller’s future political clout, after he suffered an unexpected defeat in July when council opted to defer the measures, forcing him to order unpopular budget cuts.

After a daylong debate and weeks of intense lobbying, councillors supported a compromise package, endorsed by prominent developers and the Toronto Board of Trade. The deal lessened the impact of the up to 2% land transfer tax, the more controversial of the two measures.

But the compromises, and the delay caused by the original deferral, mean the revenues the taxes will generate in 2008 - estimated yesterday by the city’s treasurer to be about $175-million - fall even further shy of filling the projected $414-million budget gap the city says it faces next year.

The mayor, who, in a move designed to appeal to fence-sitting councillors, agreed last week to convene a blue-ribbon panel to look for ways to reduce the city’s costs, denied yesterday’s development was a vote of confidence in him.

“I think it’s a vote of confidence in Toronto,” Mr. Miller told reporters. ” … I think what council did was vote for the future of this city in a way that says we’ve got confidence that our city is going to succeed, so we’re prepared to say something very hard to people: Please pay a bit more.”

About 200 people packed the public gallery when the vote was taken just before 7 p.m., and more were in the chamber as debate began. But unlike in July, most of the audience appeared to be supporters of the tax proposals organized by a coalition of labour unions and arts groups. Many, including the city’s union leaders, wore yellow scarves to show their support.

Lobbyists for the Toronto Real Estate Board, which waged a vocal campaign against the taxes, as well as some real estate agents and citizens opposed to the taxes, were on hand as well, but their numbers dwindled as the day wore on. As the mayor rose to speak in the morning, he was heckled by a realtor who was then escorted out by security.

Case Ootes (Ward 29, Toronto-Danforth), who was among the group of right-leaning councillors leading opposition to the taxes, argued that while the vote didn’t go their way, his side had defeated the mayor in the battle for public opinion: “He won the vote, but he lost the city.”

At the lunch break, Councillor Anthony Perruzza (Ward 8, York West) told reporters that he still had an “open mind” on the mayor’s tax proposals. In the debate’s dying minutes, he finally announced he was supporting the land-transfer tax, but not the vehicle tax. Councillor Maria Augimeri (Ward 9, York Centre) voted the same way.

Councillor Peter Milczyn (Ward 5, Etobicoke-Lakeshore) supported the vehicle tax but voted against the land-transfer tax.

After the taxes passed, the crowd of Miller supporters broke into sustained applause - and Mr. Miller strode over to Councillor Mark Grimes (Ward 6, Etobicoke-Lakeshore) and shook his hand. Mr. Grimes, a low-profile councillor and not a member of the mayor’s inner circle, helped craft the 11th-hour compromise that won over centrist councillors and key business leaders.

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Lori Mcleod, Globe and Mail

A flood of foreign investment in luxury condo developments is vaulting Toronto to the status of a world-class destination and financial centre, but also runs the risk of creating “concrete caverns” that push low-income residents well out of the downtown core.

“Silent” money is pouring in from places including Russia, Dubai and South Korea, spurring an explosion of condo developments with suites selling for a staggering $1,000 per square foot or more, said Sherry Cooper, chief economist at BMO Nesbitt Burns.

These ritzy developments will boost the city’s revenue base and vault Toronto into the big leagues alongside London and New York, Ms. Cooper said. They’ll also create new jobs, gentrify some neighbourhoods such as Yonge Street south of Bloor Street, and stimulate economic growth, she added.

However, with the benefits come challenges, including the erosion of affordable housing downtown and strain on public services, Ms. Cooper said.

“While net-net I believe this is a positive, there’s also the clear risk of displacement of low-income residents who will no longer be able to afford anything near the downtown core,” Ms. Cooper said in an interview.

High prices are spilling over from the posh Yorkville and waterfront districts into surrounding areas, where anything other than a “shoebox” is becoming out of reach for many buyers, including young families, Ms. Cooper said.

More people commuting to downtown from satellite communities will put additional strain on already-jammed public transportation, roads and highways. As developers snap up everything from parking lots to low-rises, downtown Toronto is also in danger of losing its character and views.

“We run the risk of creating concrete caverns that block the sun and increase gridlock on already-busy city streets,” Ms. Cooper said.

This inflow of funds is escaping notice because it is difficult to follow and is not tracked by Statistics Canada, said Ms. Cooper, who has compiled much of her data anecdotally and through visits to the sales centres for high-end developments.

As of Aug. 31, Toronto had 13 luxury condo high-rise projects on the go, including the Four Seasons, Trump International Hotel & Tower, and Residences at the Ritz-Carlton, according to data from RealNet Canada Inc.

Many foreigners aren’t buying solely for investment reasons, but also plan to use their condos when they visit Toronto and as a home base for travels in North America, Ms. Cooper said.

In addition to traditional condos, some high-end developments are offering hotel rooms that owners can use when they are in Toronto, then receive revenue when the units are let out to hotel guests.

Billionaire Donald Trump, who broke ground on his 57-storey project at Bay and Adelaide streets last week, said despite its world-class status, Toronto real estate is still a bargain by international standards.

His project, which is 70-per-cent sold, has attracted buyers from the United States, Hong Kong and Europe, Mr. Trump said. More units will be released for sale this fall starting at $1.6-million.

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Is the new Toronto Land Transfer Tax going to make people buy sooner?

By Astrid Poei, 24 Hours

Toronto real estate buyers and sellers looking to hold onto their last dollar may be rushing to buy or sell their home before the new Toronto land transfer tax comes into effect at the end of this year.

The controversial tax, passed in a 26-19 vote by city council on Monday night, will be collected on purchases that are signed after Dec. 31.

The tax affects 0.5% on the first $55,000 of residential property values, 1% on the next $345,000 and 2% on more than $400,000. First-time buyers do not pay on the first $400,000.

Buyers trying to avoid paying for the new levy would need to sign on the dotted line before the new year and sellers hoping to make their asking price more attractive for potential investors, may be placing their homes on the block sooner rather than later.

“Anytime there’s a market destabilizing force like the implementation of a new tax, you do tend to see correlative changes in consumer behaviour,” said Kevin Gaudet of the Canadian Taxpayers Federation. “People thinking to buy a house next year because they wanted to save a few extra bucks (for a larger down payment) may facilitate the decision in moving forward (sooner)… these types of taxes have an impact.”

Von Palmer of the Toronto Real Estate Board said the tax will have an economic impact of up to $33,000 per purchase to other industries such as furniture, which thrive on home sales. He also added that buyers will be forced to place smaller down payments or carry larger mortgage payments over time.

He said it still remains to be seen whether or not the impending tax will result in an upward or downward spike in Toronto real estate sales.

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Contact the Jeffrey Team for more information - 416-388-1960