The rising cost of new homes in Toronto is not just about high real estate values; it’s also about the substantial new home taxes embedded in every step of development and sale. For developers and buyers alike, these taxes increase housing costs and restrict affordability. This article examines how taxes and fees accumulate and their impact as a percentage of the total cost of a $1.2 million new home.
Development Charges
Development charges, collected by the City of Toronto, fund essential infrastructure like roads, transit, and public services. For a new single-family home, these charges are now approximately $99,403. This fee has surged over recent years due to Toronto’s pressing infrastructure needs and has become a significant part of a developer’s overall costs, impacting the final price paid by homebuyers.
Municipal Land Transfer Tax (MLTT)
Toronto’s municipal land transfer tax applies to all property purchases within the city. For a $1.2 million home, this tax adds approximately $18,000, making up a notable portion of the property’s cost. This tax effectively doubles the financial impact when combined with Ontario’s provincial land transfer tax, creating a combined burden on buyers and pushing prices higher.
Provincial Land Transfer Tax
The Ontario land transfer tax, similar to the MLTT, applies to all property transfers. On a $1.2 million home, the tax costs another $18,000. Together with the MLTT, buyers face approximately $36,000 in land transfer taxes. This double layer of taxation makes Toronto one of Canada’s most heavily taxed cities for real estate transactions, impacting buyer affordability.
Harmonized Sales Tax (HST)
In Ontario, new home purchases incur HST, which applies at a rate of 13% on the purchase price. For a $1.2 million property, this translates to $156,000 in HST. Ontario does offer a rebate on the provincial portion of the HST for primary residences, capped at $24,000. After the rebate, the effective HST is approximately $132,000, making up over 10% of the property’s total cost. This tax is among the largest contributors to the high cost of new housing.
Vacancy Tax
In an effort to reduce unoccupied housing, Toronto raised its vacancy tax to 3% of the property’s assessed value for 2024. For homes that remain vacant, this tax would equate to about $36,000 annually for a property worth $1.2 million. Although not every buyer faces this tax, it places added pressure on developers holding unsold units and increases carrying costs.
Education Development Charges (EDCs)
Education development charges, collected to support local school infrastructure, add about $3,000 to the cost of a new home. Though not as substantial as other taxes, it still contributes to the overall tax burden on development projects.
Building Permit and Inspection Fees
Building permits and inspections ensure that new developments meet safety and compliance standards. In Toronto, these fees generally cost around $10,000 for a single-family home, further adding to the expenses passed on to buyers.
Summary of Taxes and Percentage of Total Property Cost
The following table provides a breakdown of each tax and fee, showing the cost of each as a percentage of the $1.2 million property price. This perspective demonstrates how embedded taxes significantly influence Toronto’s high housing costs.
| Tax/Charge | Cost (CAD) | % of Property Price | Description |
|---|---|---|---|
| Development Charges | $99,403 | 8.28% | Funds city infrastructure and services |
| Municipal Land Transfer Tax | $18,000 | 1.5% | City tax on property purchase |
| Provincial Land Transfer Tax | $18,000 | 1.5% | Provincial tax on property purchase |
| Harmonized Sales Tax (HST) | $132,000 | 11% | Tax on new home purchase |
| Vacancy Tax | $36,000 | 3% | Annual tax on vacant properties |
| Education Development Charges | $3,000 | 0.25% | Funds local school infrastructure |
| Building Permit & Inspections | $10,000 | 0.83% | Permits and inspections |
| Total Taxes and Charges | $316,403 | 26.37% |
Development charges, land transfer taxes, HST, vacancy taxes, and additional fees create a complex cost structure that ultimately falls on buyers. For a $1.2 million property, total taxes can easily surpass $300,000, making Toronto one of Canada’s most taxed housing markets.
