Ontario Liberal leader Bonnie Crombie has received praise for her party’s ambitious housing platform, detailing plans to help municipalities scrap development charges and selectively eliminate the land transfer tax.
The housing plan titled “More Homes You Can Afford” promises that a Liberal government would eliminate the land transfer tax for first-time homebuyers, seniors seeking to downsize, and non-profit homebuilders.
The Liberals would also seek to scrap development charges on new housing, claiming to cut as much as $170,000 on each new family-sized home.
To compensate municipalities for lost revenue in the absence of development charges, the Liberals would establish the “Better Communities Fund” to help municipalities with their finances.
The announcement comes shortly after Crombie’s Liberals released their plan to cut income taxes for the middle class, eliminating sales taxes on home heating and hydro bills, and slashing the small business tax rate in half.
The Ontario director for the Canadian Taxpayers Federation Jay Goldberg told True North that the announcement is a “good step in the right direction.” for the Ontario Liberals.
Goldberg said that while he would prefer a complete elimination of land transfer taxes, the Liberals’ policy of selectively eliminating land transfer taxes is a net positive.
“Land transfer taxes really should go generally, but this is a very good first step in talking about getting rid of these land transfer taxes for some individuals in some cases, but we definitely think that land transfer taxes should go completely,” said Goldberg.
Goldberg also approved of the idea of scrapping development charges, explaining that these taxes contribute significantly to the cost of a new home and getting rid of them would contribute to housing affordability.
“Generally I think getting rid of development charges is a good thing. I think that it does increase certainly the cost of new homes,” said Goldberg.
However, forcing municipalities to scrap their development charges and replace them with the Better Communities Fund would be a difficult task for the province to execute.
“My concern with this replacement fund is not so much that you’re getting rid of development charges, which I think is a good thing, but that municipalities could potentially hold the province hostage and say “if you don’t give us buckets of more cash, we’re going to re-impose development charges.”
Overall, Goldberg says that he is happy to see the Ontario Liberals reform their party’s platform with taxpayer-friendly policies, unlike Liberal platforms under former leaders Kathleen Wynne and Steven Del Duca.
Entrepreneurs and real estate developers Matt Spoke and Chris Spoke told True North that the Liberals’ housing agenda is satisfactory, but could use some improvements.
“I think that reducing or eliminating development charges and land transfer taxes is a great idea,” said Chris.
“Development charges in particular increase the cost of development which naturally leads to less development, less housing, and ultimately less downward pressure on housing prices. For context, Toronto’s development charges have increased by approximately 10x over the past decade.”
Matt added that development charges severely impact the price of new homes, in direct effect they have on new homes, and in the opportunity cost of homes that end up not getting built.
“Development charges are often thought of as a direct one-to-one cost impact to a buyer. In reality, I’d argue it’s worse than that, because that math doesn’t factor in the homes that never get built because of the DCs in the first place. It could be that eliminating $1 of DCs drops home prices up to $2,” said Matt.
However, Chris criticized Crombie’s plan to deliver specific carve-outs to the land transfer tax for first-time homebuyers and seniors, advocating for a more universal tax-cutting approach.
“I generally dislike the trend to increasingly complex policy proposals, where it’s not enough to simply cut taxes, we have to cut taxes but only for a certain group of people and for a certain range of taxable products,” said Chris.
“Simplicity in policy design is highly underrated. The Crombie proposals would have been meaningfully improved by not attaching the limits and conditions to these tax cuts.”
Chris suggested that the Liberals follow up their housing announcement with plans to reform land use rules while Matt suggested that Toronto’s mayor scrap the city’s municipal land transfer tax along with the province.