OTTAWA -- The City of Ottawa's finance and economic development committee (FEDCo) has approved a plan to develop a tax rate on vacant residential properties, in a bid to encourage property owners to occupy or rent their homes.

The tax, if approved by city council, 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. 

Under the initial framework of the vacant unit tax program, 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.

The new regime is expected to be implemented in 2022, with billing to begin in 2023. Staff are considering a one per cent rate for vacant homes in Ottawa.

A report prepared for Tuesday's FEDCo meeting said the new tax would generate about $6.6 million in its first year, based on an assumption of 1,500 vacant units. The city claims 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.

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 FEDCo report states that the city's vacancy rate is expected to return to pre-pandemic levels of below two per cent by 2023.

The plan will rise to city council June 9.

--With files from's Josh Pringle.