On Monday, Toronto city council passed an $11.12 billion operating budget, which includes a 2.1% increase in residential property tax. Residents, however, will have to pay an additional 0.5% for the city’s build fund (which supports infrastructure projects) as well as an extra 0.31% towards the enhancement of Toronto’s business climate and reassessment impact, totalling a 2.9% hike.

City council voted 31-11 in favour of the 2.1% property tax, an increase that would make the average Toronto homeowner pay around $81 more a year. There was support from some councillors for the property tax to be greater, as much as 4%, however those motions failed to get sufficient backing. According to Mayor John Tory, his strategy this term aims to keep property taxes low while remaining in-line with the rate of inflation. “The 2018 budget ensures we invest in key areas and, for the fourth year in a row, the budgetary property tax increase will be kept at or below the rate of inflation,” Councillor Gary Crawford said. Commercial properties will see an increase of 1.05% and industrial properties will see a 0.70% increase.

Toronto continues to have the lowest property tax in the Greater Golden Horseshoe Area (GGHA). To balance it out, the city largely relies on revenue from the Municipal Land Transfer Tax (MLTT), which is estimated to generate $808 million this year, a $92 million increase over 2017. Introduced in 2007 and implemented in 2008, the MLTT is a tax on land sales in the city. Due to provincial legislation, Toronto is limited in the ways it can collect revenue. The city is prohibited from taxing income, fuel, and sales, as well as school boards, hospitals, and college/universities, hence the implementation of land taxes (which legislation allows).  Over the past years, the MLTT has been an increasingly lucrative revenue source for the city, as funds secured through it account for nearly 7% of the city’s operating budget. Due to the changes in the housing market, critics say it is a bad idea to depend on such revenues. January saw a decline of 22% in home sales in comparison to the year prior. “City Councillors would be wise to note the vast difference between last January’s real estate market and this January’s,” states TREB President, Tim Syrianos. “They should heed the City Manager’s ongoing warning of over reliance on this tax. The Land Transfer Tax is not a good way to fund municipal services.” In the event of a housing market crash, city council would need to make a mid-year budget adjustment to find other sources of revenue or make cuts to various services and programs in the city.