City of Ottawa considers one per cent tax on vacant residential properties

OTTAWA — The city of Ottawa stands to make $36 million over the next six years from imposing a tax on empty homes, a new report says.

The report for the finance and economic development committee outlines the possible implementation of a residential vacant unit tax in the city, with a tax rate of one per cent. In December, council approved a motion directing staff to study the feasibility of imposing a property tax on vacant residential units, with the money supporting affordable housing.

Staff say the residential vacant unit tax will encourage homeowners to maintain, occupy or rent their properties, increasing the housing supply.

“The tax will also reduce the number of property standards issues by motivating property owners to exercise their options to resolve the outstanding issues,” says the report for the June 1 committee meeting.

A residential unit would be considered vacant if it has been unoccupied for more than 184 days in the previous calendar year.

Eligible properties include single-family homes, semi-detached homes, residential condominiums, duplexes and triplexes.  Principal residences and rented properties identified by a person as their principal residence would be excluded from the residential vacant unit tax.

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 their home is occupied or not.

Staff estimate between 760 and 3,000 homes are considered vacant in Ottawa. Under the assumption there are 1,500 vacant units, a one per cent residential vacant unit tax would generate $6.6 million in the first year, with an additional $29.4 million for the following five years.

A one per cent residential vacant unit tax on the average assessed home of $415,000 would result in a tax bill of $4,150.

The city estimates the start-up costs for the tax would be $3.5 million over 2.5 years, after which the ongoing operating costs would be $1.3 million a year.,

Vancouver is the only municipality in Canada charging a tax on vacant residential units, currently at 1.25 per cent of the assessed value of the empty home. The city of Toronto is currently developing a residential vacant unit tax.

A city of Ottawa survey found 77 per cent of respondents support the idea of a residential vacant unit tax, and 72 per cent support a tax rate of one per cent of more.

Canada Mortgage and Housing Corporation says Ottawa’s vacancy rate jumped from 1.8 per cent in October 2019 to 3.9 per cent in October 2020. CMHC said the increase was likely a temporary situation created by the pandemic.

If council decided to pursue the residential vacant unit tax, staff will undertake further study.

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