Toronto Mayor Olivia Chow is proposing a significant increase to the land transfer tax on luxury home sales as the city prepares its 2026 budget and looks to stabilize its strained finances. The plan targets properties sold for $3 million or more, with the highest rates applying to sales of $20 million and above.
In a letter to her executive committee, Chow said the measure is designed to shift more of the city’s financial burden toward residents who are best positioned to pay. Under the proposal, the tax on homes priced between $3 million and $4 million would rise from 3.5 per cent to 4.4 per cent — meaning the buyer of a $3 million property, who currently pays about $61,000 in municipal land transfer tax, would see a notable increase. Even higher rates would apply to more expensive homes, topping out at 8.6 per cent for properties worth $20 million or more.
If council approves the changes later this month, the city expects to collect roughly $152 million from the luxury home tax in 2026, nearly $14 million more than in 2024. The tax targets a very small segment of the market: only about 1,164 transactions — roughly two per cent of all home sales in the city — fell under the luxury category last year, affecting just 0.5 per cent of Toronto residents. Chow emphasized that 98 per cent of homebuyers will see no impact from the proposed increases.
Revenue from the tax would support existing programs, including the city’s universal school food initiative and the continued freeze on TTC fares. But the plan arrives at a time when Toronto is increasingly dependent on property-related revenue streams that fluctuate with the housing market. Development charges, a key municipal funding source tied to new construction, have plummeted this year as housing starts hit historic lows. The city expects to collect only about $120 million in development charges — a steep drop that threatens its ability to deliver new infrastructure projects.
Chow said she is not worried about the volatility of the housing sector affecting luxury sales, arguing that high-end properties have remained stable even as the broader market softened. While overall home sales dropped by about 15 per cent in 2024 and 2025, sales of multi-million-dollar homes remained comparatively strong.
Still, the proposal has attracted pushback from industry groups. Elechia Barry-Sproule, president of the Toronto Regional Real Estate Board of Trade, criticized the tax hike, warning that it may discourage the turnover of move-up homes and push wealthy buyers into competing for more affordable properties — a shift that could add pressure to an already tight housing market. Richard Lyall, president of the Residential Construction Council of Ontario, said adding taxes during a housing crisis “doesn’t make any sense,” though he acknowledged the practical impact on construction will be limited given how few properties will be affected. “It’s the principle,” he said.
Chow’s proposal now heads to council for debate, where it is expected to become a focal point of discussions leading into next year’s budget — and the next municipal election.