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Stuck in Place: The Effect of Land Transfer Taxes on Housing Transactions

Author

Listed:
  • Benjamin Dachis

    (C.D. Howe Institute)

Abstract

Numerous provinces and municipalities across Canada levy Land Transfer Taxes (LTTs). An LTT is a charge paid to a municipality or provincial government, upon the sale or transfer of real estate or similar immovable object. LTTs can be expensive, and make up a significant portion of the expenses associated with ordinary housing transactions, making moving more costly. The higher transaction costs, owing to the LTT, may cause some households to tolerate living in ill-suited homes for longer than they would have otherwise desired. Other potential effects of LTTs include government revenue volatility, commercial real estate market distortions, and higher construction costs. Municipalities that levy LTTs should limit themselves to other revenue-raising tools and replace the LTT with a revenue-equivalent property tax levy. Provincial governments that impose an LTT should replace their LTTs with revenue from value-added taxes.

Suggested Citation

  • Benjamin Dachis, 2012. "Stuck in Place: The Effect of Land Transfer Taxes on Housing Transactions," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 364, October.
  • Handle: RePEc:cdh:commen:364
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    File URL: https://www.cdhowe.org/stuck-place-effect-land-transfer-taxes-housing-transactions
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    References listed on IDEAS

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    1. Hilber, Christian A.L. & Lyytikäinen, Teemu, 2017. "Transfer taxes and household mobility: Distortion on the housing or labor market?," Journal of Urban Economics, Elsevier, pages 57-73.
    2. Rupert, Peter & Wasmer, Etienne, 2012. "Housing and the labor market: Time to move and aggregate unemployment," Journal of Monetary Economics, Elsevier, pages 24-36.
    3. Christian A. L. Hilber & Teemu Lyytikäinen, 2012. "The Effect of the UK Stamp Duty Land Tax on Household Mobility," SERC Discussion Papers 0115, Spatial Economics Research Centre, LSE.
    4. Bev Dahlby & Michael Smart & Benjamin Dachis, 2009. "New Housing and the Harmonized Sales Tax: Lessons from Ontario," C.D. Howe Institute Backgrounder, C.D. Howe Institute, issue 119, October.
    5. Michel Beine & Serge Coulombe & Wessel N. Vermeulen, 2015. "Dutch Disease and the Mitigation Effect of Migration: Evidence from Canadian Provinces," Economic Journal, Royal Economic Society, vol. 125(589), pages 1574-1615, December.
    6. Benjamin Dachis & Gilles Duranton & Matthew A. Turner, 2008. "Sand in the Gears: Evaluating the Effects of Toronto's Land Transfer Tax," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 277, December.
    7. Dan Andrews & Aida Caldera Sánchez & Åsa Johansson, 2011. "Housing Markets and Structural Policies in OECD Countries," OECD Economics Department Working Papers 836, OECD Publishing.
    8. Dan Andrews, 2010. "Real House Prices in OECD Countries: The Role of Demand Shocks and Structural and Policy Factors," OECD Economics Department Working Papers 831, OECD Publishing.
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    Cited by:

    1. repec:eee:juecon:v:101:y:2017:i:c:p:57-73 is not listed on IDEAS
    2. Christian A. L. Hilber & Teemu Lyytikäinen, 2012. "The Effect of the UK Stamp Duty Land Tax on Household Mobility," SERC Discussion Papers 0115, Spatial Economics Research Centre, LSE.
    3. Adam Found & Peter Tomlinson, 2012. "Hiding in Plain Sight: The Harmful Impact of Provincial Business Property Taxes," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 368, December.
    4. Hilber, Christian A.L. & Lyytikäinen, Teemu, 2017. "Transfer taxes and household mobility: Distortion on the housing or labor market?," Journal of Urban Economics, Elsevier, vol. 101(C), pages 57-73.
    5. Philip Cross & Philippe Bergevin, 2012. "Turning Points: Business Cycles in Canada Since 1926," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 366, October.
    6. Benjamin Dachis & Adam Found & Peter Tomlinson, 2014. "The 2014 C.D. Howe Institute Business Tax Burden Ranking," e-briefs 187, C.D. Howe Institute.

    More about this item

    Keywords

    Fiscal and Tax Competitiveness; Canadian provincial and municipal governments; Land Transfer Taxes (LTTs); real estate sale or transfer; household mobility;

    JEL classification:

    • H71 - Public Economics - - State and Local Government; Intergovernmental Relations - - - State and Local Taxation, Subsidies, and Revenue
    • H21 - Public Economics - - Taxation, Subsidies, and Revenue - - - Efficiency; Optimal Taxation

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