In the wake of a significant political shift in Calgary, a clear contrast in municipal tax policy is emerging between Alberta's largest city and Toronto, sparking renewed debate over Toronto's contentious land transfer tax.
Calgary's Course Correction vs. Toronto's Trajectory
The benefits of Calgary's October election, which saw voters replace a left-wing mayor, are materializing swiftly. The city has announced a reduction in a planned 2026 property tax increase from 3.6 per cent to 1.64 per cent, a move that rolls back what would have been another hike on top of previous years' significant increases.
This stands in stark contrast to Toronto's fiscal direction under Mayor Olivia Chow. In her first two years, Chow has implemented a cumulative 17.1 per cent property tax increase for residents. Last week, she confirmed intentions to push taxes higher again in 2026, though at a reduced pace, without specifying the exact figure. This future hike will be in addition to an increased municipal land transfer tax on residential properties sold for more than $3 million.
The Ripple Effects of a "Horrendous" Tax
Defending the land transfer tax hike, Mayor Chow claimed it "doesn't impact" 98 per cent of homebuyers and has no downside. However, economists and industry experts strongly dispute this assertion.
The Toronto Region Real Estate Board (TRREB) warns that the tax creates perverse incentives. By imposing a higher cost on homes above $3 million, it encourages some buyers to purchase properties just below that threshold instead. This action bids up prices for more affordable homes. TRREB argues this leaves higher-income buyers competing directly with first-time homebuyers and younger residents for lower-priced stock, exacerbating affordability challenges.
The negative consequences extend further. A higher land transfer tax discourages new homebuilding and can incentivize high-income professionals working in Toronto to purchase homes outside the city limits to avoid the tax, leading to longer commutes and reduced economic activity within Toronto.
Public Backlash and Proposed Solutions
There are clear signs that Torontonians are growing weary of the tax burden. An Ipsos poll commissioned by TRREB found compelling public sentiment: 88 per cent of Torontonians believe housing taxes are too high, 81 per cent agree that high development fees and taxes contribute to the affordability crisis, and 56 per cent think the municipal government relies too heavily on the land transfer tax.
In response, groups like the non-profit ABC Toronto are pushing for reforms. One proposal is to allow first-time homebuyers to roll the land transfer tax into their annual property tax bills, paying it over a decade without interest. While this could mitigate immediate financial barriers for new entrants, analysts like Matthew Lau argue it doesn't go far enough and creates an uneven system.
The core argument from critics is that the tax should be eliminated entirely. They cite a 2021 C.D. Howe Institute report by economists Benjamin Dachis, Bev Dahlby, and Jack Mintz, which found that land transfer taxes carry a high economic cost. The tax discourages mobility, preventing people from moving to homes better suited to their needs, whether closer to work, school, or family.
The report also concluded that the combined provincial and municipal tax rate on homes over $2 million is "highly distortionary" and warned that any further increase could actually reduce government revenue by suppressing home sales activity.
As Calgary demonstrates the fiscal recalibration possible after a change in leadership, pressure is mounting on Toronto's administration to reconsider a tax policy widely criticized for hindering mobility, worsening affordability, and stifling the city's housing market.
