Image Supplied City of Ottawa
Ron Rose
There is general agreement that Ottawa is in a housing crisis. The demand for housing exceeds the supply available. At the same time, the most recent census data available indicate that there are approximately 22,000 vacant housing units in Ottawa. The City believes that these vacant homes are a potential source of housing supply. In order to make more of these vacant units available, the City has decided to tax vacant units to encourage the owners to make them available for rent. The City estimates that the new Vacant Unit Tax (VUT) will generate approximately $6.6 million annually and proposes to make $5.0 million of that available for affordable housing.
The VUT will be levied in 2023 but will apply to the 2022 calendar year. The tax will be levied on all residences (with a few exceptions) that are vacant for more than 184 days in a calendar year, and the tax will be 1% of the assessed value of the property. A residence valued at $500,000 therefore will attract an additional $5,000 in tax.
All the estimated 330,000 residential properties in Ottawa are liable for this tax, whether the property was vacant or not. In order to avoid the tax, the onus is on the owner to declare that the property was occupied for more than 184 days in the previous calendar year. If a homeowner has a property that was vacant for more than 184 days in 2022, they will be taxed in 2023, unless they can prove that they are eligible for an exemption.
This could be interpreted as a form of negative billing. Alex Cullen, the President of the Federation of Citizens Association, has claimed, “the City is using negative-option billing as the means of applying the Residential Vacant Unit Tax. Negative-option billing, where the onus is on the consumer to apply to be exempt from paying imposed charges, is very unpopular with consumers — and with just cause.” Joseph Muhuni, Deputy City Treasurer, responded to the allegation of negative billing, noting “The VUT is in full compliance with Ontario regulations (…) which allow municipalities to impose a tax on the assessed value of vacant units. The practice of mandatory declaration is demonstrated to be a much more successful method of accounting for vacant homes in a community when compared to alternatives such as voluntary declarations or a complaint-based system” he said.
So, what are the exemptions—how can you avoid the tax? The major exemption is that the tax will not be levied on a principal residence, so if your home is your principal residence, you will not be taxed. Most homeowners in Old Ottawa East live in their principal residence, so in theory, this tax should not be an issue for them. But, the catch is, in order to qualify for this principal residence exemption, the homeowner must submit a declaration to the City stating that the building is their principal residence. Failure to submit that declaration means that they will be taxed.
Other exemptions apply for houses that are being renovated, houses owned by people in long-term care, houses that have been sold, rural vacation properties, and a few others.
To add insult to injury, if you forget to make the declaration, and send it in late, you will be liable for a $250.00 fine.
Details on the Vacant Unit Tax are available at https://ottawa.ca/en/living-ottawa/taxes/vacant-unit-tax https://ottawa.ca/en/living-ottawa/taxes/vacant-unit-tax.
