If you really wanted to help Toronto, you’d buy a new home. Here’s why.

The city is banking on this being one of the best years ever for real estate sales to bring in land transfer tax revenue. Mayor John Tory would really, really appreciate it if you would buy a new house or condo this year. In fact, he’s counting on it.

Call it your civic duty. In the proposed 2023 budget Tory unveiled last week, the city is banking on $947.7 million in revenue from the municipal land transfer tax — the additional fee Toronto buyers are charged when they buy a house or condo in the city.

That $947.7 million is the exact same amount city hall budgeted for last year. The assumption is that 2023 will be one of the very best years for land transfer revenue since the tax was implemented in 2009, behind only 2021’s $1.18 billion and the final take for 2022. (City hall is still waiting for final year-end actuals for last year.)

And this is revenue city hall is relying on. When it was introduced in 2009, municipal land transfer tax revenues made up less than two per cent of Toronto’s budgeted tax revenue. In 2023, it’s supposed to bring in nearly seven per cent. Replacing it would require a 24 per cent residential property tax increase.

When Councillor Gord Perks asked about the land transfer tax budget projection at a meeting of city hall’s budget committee last month, City of Toronto CFO Heather Taylor was optimistic. She noted that the city was on pace to exceed the budgeted land transfer tax amount for last year.

“We are confident based on the trend we have seen over the last six months in that forecast taking us into 2023,” Taylor explained. “We’ve done detailed analysis and we are comfortable with what is in the budget.” 

Of course, that analysis was done before anyone had seen the January sales numbers. The Toronto Regional Real state Board reported that just 1,108 Toronto home sales occurred in January, down an incredible 50 per cent from the same month last year. And the problem, of course, is that Toronto’s real estate market does not look set to have a whopper year.

That makes January 2023 the third-lowest monthly mark for Toronto real estate sales since 2009, ahead of only pandemic-ravaged April 2020, when just 1,036 transactions occurred, and January 2009, when the world was dealing with a financial crisis and 1,106 homes were sold.

Prices are down too, though not as much. The average price of houses and condos sold in January dropped from about $1.2 million a year ago to $1 million. But even if prices stabilize, the danger for city hall’s revenue take remains. The city only gets a cut when a sale occurs, so a market of high-priced homes that aren’t selling frequently is a recipe for reduced tax revenue.

Taylor also explained that the budgeted figure has built in a kind of insurance against a downturn. Of the $947.7 million in budgeted revenue, only about $800 million is set to go toward ongoing operating expenses. The remainder is budgeted for longer-term capital projects, like road repair or new infrastructure construction. 

Even if a sudden market recovery somehow delivers on Toronto’s 2023 land transfer tax projections, it will remain concerning that city hall’s ability to pay for vital infrastructure hinges on this annual real estate gamble.