City Council approves one per cent tax on vacant homes in Ottawa

Hintonburg resident proposes the City of Ottawa should introduce a levy on landlords who leave their buildings empty. (Shaun Vardon/CTV News Ottawa)

OTTAWA -

Ottawa city council has approved a plan to impose a one per cent tax rate on vacant homes in the city.

Councillors Riley Brockington and Rick Chiarelli dissented.

The tax would be included in a homeowner's final property tax bill if a unit were to be vacant for more than 184 days per year. The tax would not apply to the owner's principal residence. Eligible properties include single-family homes, semi-detached homes, residential condominiums, duplexes and triplexes.

The owner of a home with an assessed value of $415,000, for example, would be charged an additional $4,150 on their property tax bill at the end of the year if the unit was considered unoccupied.

Only residential homes classified in the residential property tax class would be subject to the residential vacant unit tax. All 307,000 homeowners in Ottawa would have to sign a declaration from the city stating whether their home is occupied or not.

Brockington took issue with a requiring every homeowner to tell the city that their home was occupied each year.

"That's a huge red flag for me," he said. "If we thought our constituents were upset because they got a postcard in the mail about sewer line insurance, wait until they get a $5,000 bill because they didn't reply to the request to indicate whether their unit was inhabited or not."

Deputy City Treasurer of Revenue Joseph Muhuni told Brockington property owners have the right to appeal charges under the new tax.

"Upon the appeal, we would then investigate and if the unit was deemed to be occupied, they would then receive a credit on the bill," he said. "However, we want to avoid that whole process of going through the appeal because it takes time for the homeowner and the city, so we want to encourage as many people to declare up front before they have to go through this process."

The new regime is expected to be implemented in 2022, with billing to begin in 2023.

A report prepared for the finance and economic development committee (FEDCo) said the new tax would generate about $6.6 million in its first year, based on an assumption of 1,500 vacant units. Staff said the tax is not meant to be a major revenue generator; rather, the tax is meant to increase the available housing stock in the city.

However, speaking before the vote, Mayor Jim Watson said the additional revenue could also help fund affordable housing.

"There's no question that this is going down an uncharted path," Watson said. "At the end of the day, it has the potential to bring millions of dollars into the city that will go directly back into affordable housing projects, new builds and renovations."

Staff estimate it would cost $3.5 million over 2.5 years to launch the proposed program, after which the ongoing operating costs would be $1.3 million per year, funded by the revenue generated from the tax itself.

The Canadian Mortgage and Housing Corporation (CMHC) said the vacancy rate in Ottawa rose to 3.9 per cent in 2020 from 1.8 per cent in 2019, largely due to COVID-19 pandemic factors, such as lower rates of student rentals. The city says the vacancy rate in Sandy Hill, for example, rose from 2.6 per cent in 2019 to 6.7 per cent in 2020.

The city expects vacancy rates to return to pre-pandemic levels over the next few years.

--With files from CTVNewsOttawa.ca's Josh Pringle.