Nowadays, just a simple mention of the word ‘tax’ immediately conjures the image of more money flying out of your wallet. However, the new Vacant Unit Tax (VUT) is more of an incentive in the City’s toolbox to help individuals and families find a safe place they can call home.
Ottawa’s housing supply has grown tighter, and the rental and sale prices have risen dramatically over the past two years. This has created a struggle for residents and their families to find a place to live within a price range they can afford. Ottawa City Council declared an Affordable Housing and Homelessness Emergency in 2020. But since that time, the cost of living has also soared – led by rising fuel and food prices.
The Vacant Unit Tax acts as an incentive to ensure secondary or other residential investment properties – which are not the owner’s principal residence – remain occupied. This will motivate the owner to either rent the property or place it back on the market, creating more available housing to help stem the rising housing and rental prices.
To declare your property as a principal address, the City will require residents to complete a simple, easy-to-use declaration form online annually – requiring your name, roll number, address, and telephone number. The first annual declaration will be required in 2023 to cover the 2022 calendar year. More information will be made available online on ottawa.ca later this year.
Occupancy details for the previous year will be required for any secondary properties. If it’s vacant for over 184 days – which is roughly half a year– the property could be subject to a one-per-cent tax of the assessed value on the final property tax bill unless it meets the following exemptions:
- Death of a registered owner
- Property owner in a hospital or long-term care facility
- Arm’s length sale of the property
- Specific court orders prohibiting occupancy, sale, or rental of the property
- The property was undergoing extended renovations or construction
- Was used as a cottage rental with a valid permit for at least 100 days
The City has made the annual declaration mandatory for all homeowners for reliable and accurate data, and to ensure the program is effective. A voluntary declaration would be ineffective as it would not garner full participation. It would depend solely on a sense of civic duty of those owners of vacant properties to truthfully declare that fact to be taxed. The voluntary declaration has failed in jurisdictions where it has been used. While the City has certain utility usage data that may indicate if a home is vacant, such data may not be legally used for this purpose and would not indicate if a home is a principal residence.
As the first annual declaration covers the 2022 calendar year, property owners with vacant secondary properties that do not meet the exemptions listed above should put them up on the rental or sales markets to avoid the tax.
The Vacant Unit Tax has a secondary benefit which helps those in need. All proceeds generated from the tax will help fund affordable housing initiatives. The City’s Ten-Year Housing and Homelessness Plan has committed capital funding to construct up to 500 new affordable units annually. The VUT, along with a mix of development charges and other sources, will help reduce the need for debt and the associated interest charges.
For most homeowners, the new tax will only require a few minutes to declare their property as a principal address once a year. A principal residence declaration means that there is no tax to pay. The tax will help increase Ottawa’s housing supply, control the hot real estate market, and fund affordable housing – giving more residents and families a place to call home.