Keesmaat vows to push for surtax on luxury homes to help residents achieve home ownership

Thestar.com
October 5, 2018
Jennifer Pagliaro

Mayoral candidate Jennifer Keesmaat says the city should tax the rich to help others get a foothold in Toronto’s hot housing market.

On Thursday, Keesmaat announced she would push for a surtax on the property taxes of “luxury homes” valued at or above $4 million.

Mayoral candidate Jennifer Keesmaat says the city should tax the rich to help others get a foothold in Toronto’s hot housing market.

A rent-to-own program would allow 10,000 families to eventually own their units, she said.

“One of the key issues that I’m determined we address as a city is the high cost of housing,” Keesmaat said at an announcement in Liberty Village.

“The wealthiest and most fortunate among us can contribute a bit more that will allow us to act on important opportunities like dealing with the cost of housing in our city.”

The additional tax would increase the total property tax of those homeowners by 0.4 per cent, which Keesmaat said would affect some 3,000 properties. Her campaign said the added charge would raise about $80 million annually toward the home ownership plan.

According to the Municipal Property Assessment Corporation, there are 2,380 residential properties that were assessed to have a 2016 value of $4 million or more.

The campaign said their estimate was based on a 2017 ratio of homes sold at $4 million or more to overall home sales and that they built a “significant” margin of error into the program cost given that rough estimate.

The surtax would require the province agreeing to a change in taxation laws.

Keesmaat said she was confident Progressive Conservative Premier Doug Ford would want to help “ordinary people” get access to home ownership.

The 10,000 units in the rent-to-own program would be tied to Keesmaat’s earlier promise to build 100,000 new affordable units in 10 years.

The way it would work, Keesmaat’s campaign explained, is a resident would enter into an agreement to purchase the unit they are renting in a certain period at an amount set at the beginning of that period. That would give the person trying to buy the home certainty in the price of that investment they are working to save toward in say three years or five years. As part of her earlier affordable units promise, rent would be at 80 per cent of average market rent, allowing a renter to save for the down payment.

Once the purchase takes place, the tax revenues raised through luxury homeowners would allow the city to essentially take out a second mortgage on the unit, making the mortgage price for the purchaser 80 per cent of market value. When the home is sold, a portion goes back to the city to use toward more home ownership agreements.

Who would qualify for the program would need to be done on a fair and equitable basis and would be determined after further study, the campaign said.

Keesmaat said that, as mayor, she would also challenge the other levels of government to match the city’s contribution to increase the number of families in the rent-to-own program to 30,000.

The proposal continues to set Keesmaat apart from front-runner John Tory, who has been attacking the former chief planner for not yet commenting on municipal taxes.

Tory has promised to keep all property taxes at or below the rate of inflation for another four years.

Tory said a home ownership program is the type of idea “well worth looking at” but said Keesmaat’s approach to ask Queen’s Park for taxation changes won’t work and maintained his promise of keeping property taxes low when asked how he would fund such a program.

Keesmaat compared her proposal to the school tax in British Columbia, which starting in 2019, will see an additional 0.2 per cent tax on homes assessed between $3 million and $4 million and 0.4 per cent for homes assessed above $4 million, according to the province’s website. The tax funds the public school system.

Her campaign pointed to Vancouver and London, U.K., as examples on innovative housing approaches.

A similar program to Keesmaat’s was approved by Vancouver’s city council in 2016, requiring provincial approval, but city staff appear to be currently looking for a way to implement the program without provincial amendments. The proposed pilot program would have also seen the city maintaining an ownership stake in units to bring down costs for residents, receiving any equity gains as a result.

In London, the city is investing in building new affordable rental homes at a “significant” discount from market-level rent and supports renters to save to own their home within 10 years. Those renters can then qualify to purchase the home outright or take out a mortgage on a portion of the property through a shared ownership scheme. Those residents pay rent on the remainder to the private developer or housing association that owns the building.