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Land transfer tax — provincial party leaders’ answers receive a “realty” check
Sep 30, 2011
The Manitoba Real Estate Association and WinnipegREALTORS® hosted a provincial leaders forum broadcast live on Shaw TV on September 14. During the forum, one of the questions asked was whether the party leaders were commited to providing Manitoba home buyers with land transfer tax (LTT) relief.
In addition, REALTORS® also sent the three main political parties four written questions of concern to their members and Manitobans. The fourth question dealt with the LTT. Manitoba has the highest LTT in the country for first-time home buyers. Two other provinces also have the highest two-per-cent LTT rate levied on home purchases, but they offer generous first-time home buyer exemptions. For repeat home buyers, Manitoba’s LTT is the second highest. B.C.’s LTT rate of two per cent is the same for any sale over $200,000, but the West Coast province collects $2,000 instead of $1,650 for a property valued at $200,000. In Ontario’s case, its two per cent LTT rate does not kick in until a property is valued over $400,000.
The significantly higher LTT upfront closing cost (average increase has risen 1000 per cent since being introduced in 1987) has clearly made it more difficult for new entrants into Winnipeg’s housing market. This does not preclude other first-time sellers, who are buying their second home, or other buyers from potentially having to come up with the much higher LTT cost to pay for a home purchase. For example, anyone buying a home in either Winnipeg’s southeast or southwest quadrant, based on today’s average sale price, has to pay an estimated $3,700 LTT.  
The following breakout shows the three main political party responses to the LTT question, followed by a “realty”  check.
Manitoba NDP
At the leaders’ forum, Greg Selinger did not directly answer the question as liberal leader Dr. Jon Gerrard pointed out. Selinger said every Manitoban should be treated equally, and then went into a description of the education property tax credits to property owners. Selinger indicated he will increase the seniors’ tax credit from $1,025 to $1,100 while leaving the credit for a principal homeowner at its current $700. He tried to address our housing shortage caused by population increases. He spoke of building more housing and training more trades people. While not really answering the question about providing land transfer tax relief, he did say that the “biggest asset a family has is their home.” 
Selinger said land transfer taxes or similar fees are assessed in every province and Manitoba’s tax ranks in the middle of the pack. He emphasized homeowners only have to pay it when they buy a home and that they benefit from annual education property tax reductions. Finally, he said for every $1 in LTT revenue the province generates, they return $5.30 in education property tax relief.
Realty Check — Manitoba is not in the middle of the pack. They are at the top of the heap due to bracket creep, as the majority of home buyers are now exposed to the highest LTT rate of two per cent in the country. For first-time buyers, who do not have the benefit of equity built up and/or gained from owning a home, they must come up with upfront after-tax dollars in addition to a down payment and other closing costs before taking title to their first home. It clearly is an impediment and can literally be the difference in whether they can afford to buy their dream home. In essence, the LTT can prevent their entry into homeownership.
It is small comfort to young buyers unable to attain homeownership due to an unreasonably high LTT to know that seniors are getting higher education property tax relief. Where is the fairness? 
As for property tax relief for those who do own a home, it is a totally unfair comparison. There will  always be a far smaller number of buyers each year compared to the total number of property owners. Obviously, any property tax relief on a far larger pool of people (Manitoba still has some of the highest education taxes on property in the country), in comparison to thousands of dollars in LTT for the purchase of a home, will  make it appear more benign than it actually is for the individual home buyer.
The emphasis to build more housing of all types is welcome given our extremely tight rental market with a vacancy rate below one per cent. However, in the context of providing land transfer tax relief, Selinger said the exact opposite. By creating more housing with no reduction in the land transfer tax rate, his party views the tax as growth revenue for the province. The sad part about this approach is that it has a negative impact on home buyers and the real estate market in general, which, in and of itself, brings significant economic spin-offs to the province.
Moreover, by not offering land transfer tax relief, especially to first-time buyers who are currently renting, badly needed rental space will not be freed up  for those who prefer to rent and are unable to find rental accommodations.
If Selinger feels that the biggest asset a family has is a home and knowing that the average homeowner can move as often as every five to seven years, is he and/or his party not concerned that the tens of thousands of dollars in equity the province grabs from a home buyer over a lifetime takes away from their retirement nest egg?
Manitoba PC Party
At the leaders forum, McFadyen was critical of Selinger dodging the question and Gerrard not coming up with anything concrete in his platform. He said his party will offer a first-time home buyer exemption. He promised that a young family starting out buying their first home will not pay a LTT, taking thousands of dollars off the cost of their first home. As a result, McFadyen said it will ensure young people will want to stay in our province and set down roots and contribute to the building of Manitoba. 
He went on to agree that the LTT is much higher than it should be. The final point made was that his party makes no more promises than bringing in a first-time home buyer exemption. “(As) we go forward, we know we would like to do even better as the budget allows,” he added.
The written response reinforced what McFadyen said at the forum, but an addition was the promise to review the LTT as part of a post-election financial review. 
Realty Check — It is a step in the right direction. The question becomes how the exemption will be structured if they form the next government. It is certainly the wish of REALTORS® to be consulted, as they know first-hand the impact of the tax on buyers and how changes to the LTT can be helpful to, not only first-time buyers, but repeat buyers. REALTORS® propose moving up the exemption — as it was done originally in 1987 from $0 to $30,000 — to a threshold level more in keeping with today’s house prices so that other home buyers also get some LTT relief.
REALTORS® are encouraged that the PCs are prepared to review the LTT, and that their leader acknowledges the tax is much higher than it should be. If there is a concern, we would not want it to be delayed in order to achieve a balanced budget in seven years. Home buyers deserve better. The tax is at an unjustifiably high level now and it’s likely it will become even more excessive as time elapses. 
Manitoba Liberal Party
At the leaders forum, Gerrard explained the LTT and indicated it is two per cent. He went on to say that the big increases in house prices  means buyers need to put out more dollars and the LTT adds to the price of a home. As a result of the LTT rising, he said it is higher than it needs to be for the purpose it was originally intended.
Gerrard said he would work with REALTORS® to reduce the LTT to make it less onerous. REALTORS® are calling for a review of the LTT, with an emphasis on original intent and impact after 25 years of being in place, which received the Liberal Party’s support. The party said Manitoba has the worst inter-provincial migration rate for young people to other provinces. They want young people to return to Manitoba. Removing the LTT for them “is key to making Manitoba a magnet for young people.” 
Realty check — Since the Liberals have no realistic chance of forming the next government, they will be unable to bring LTT relief to Manitoba home buyers. The best home buyers can hope for is that  the Liberals take on an advocacy role while  in opposition, bringing attention to the unfairness of the LTT and its negative affects on our young people . REALTORS® would also want the advocacy to go beyond first-time buyers, as the LTT is a burden that is increasing and affects all Manitoba home buyers.