A big surprise for many first-time homebuyers are the closing costs. Closing costs typically add up to between 1.5% and 4% of a home’s purchase price and include home inspection fee, legal fees and disbursements, municipal and provincial land transfer taxes, title insurance and appraisal fee. If you’re making only the minimum 5% down payment, closing costs can almost be as much as your down payment.
Buying a home is already expensive as it is. And if York Region councillors get their way, it will be even more costly. Politicians there are asking the province for new tax powers with their sights set on a municipal land transfer tax (MLTT) similar to the one in Toronto. If politicians get their way, it would add over $15,000 to an average priced York Region home and double the tax burden on local families.
The proposed MLTT is a bad idea on a number of fronts. First and foremost, it hurts housing affordability. Homebuyers are already dealing with the new mortgage stress test. Couple this with a possible MLTT in York Region and “driving until you qualify” may no longer be a viable option for those looking for a house with a yard, but can’t afford the higher home prices of Toronto.
Such a move would also be shortsighted and make the dream of homeownership less achievable for the younger generation. We should be making it easier for first-time homebuyers to get into the market, not harder. Waiving the provincial land transfer tax completely for first-time homebuyers would be a good start, but I digress.
A MLTT would further limit the supply of the so-called missing middle by causing homebuyer gridlock and negatively affect housing affordability for everyone. It’d encourage homeowners to stay put and renovate their homes instead of moving up in the market, freeing up the starter homes for first-time homebuyers.
Just look at Toronto as an example. You’re paying close to $30,000 in combined municipal and provincial land transfer tax just to move across the street. Many homeowners are choosing to top up their homes, adding a second story, instead of moving to a more spacious place. The MLTT is largely to blame.
Adding a MLTT in York Region would further increase the tax burden for homeowners there. Property taxes are already higher in York Region compared to Toronto.
It also sets a dangerous precedent. If York Region adopts a MLTT, there’s nothing stopping other municipalities across Ontario from adopting a similar tax. It could spread like wildfire across the province.
Now, I realize that York Region has a funding gap of $220 million to close. But for once, don’t do it on the backs of hard-working homeowners. Find some other way to close the shortfall.
If you oppose a MLTT in York Region, let your voice be heard. Take action by letting your local city councillor and MPP know that you’re strongly opposed to a MLTT. Help stop this ill-conceived new tax from seeing the light of day.
Image Credit: https://precondo.ca/
Sean Cooper is the bestselling author of the book, Burn Your Mortgage: The Simple, Powerful Path to Financial Freedom for Canadians, available now on Amazon and at Chapters, Indigo and major bookstores, and as an Audiobook on Amazon, Audible and iTunes.