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Ottawa's Vacant Unit Tax is Working. A Suburban City Councillor Wants to End It.
Unlike the city's light rail transit system, the anti-empty home measure is doing what it's supposed to do. The city should double down on it as its housing crisis grows.
A special note: On Monday, TVO workers went on strike for the first time in the public broadcaster’s history. I have a contract with TVO for a weekly column. In solidarity with workers, I will be joining them and suspending my column as long as the strike continues.
Lots of things are broken in Ottawa. Most infamously busted is the city’s light rail transit system, a public-private partnership for trains that don’t run when it’s hot or cold outside, or when people try to use them. One thing that does seem to work, however, is the city’s vacant unit tax (VUT). A suburban city councillor wants to scrap it.
The VUT, which charges owners 1% for empty units unoccupied for more than 184 days out of the year, is designed to incentivize homeowners to rent out vacant properties. Similar taxes exist in Vancouver and Toronto. It does not apply to an owner’s principal residence, so we’re talking about people who own more than own livable property. There are also exemptions for houses that are being renovated or sold.
Ottawa, like much of the country, is in a housing crisis — one that is particularly severe for poor folks. In a recent report, the Canadian Centre for Policy Alternatives finds that while the minimum wage in the city as of October 2022 (the year in which data was collected) was $15.50, a renter would have to make $26.68 to afford a one-bedroom unit or $32.37 for a two-bedroom unit. That makes Ottawa one of the top-five most expensive urban areas in the country for rentals.
In June, the city reported roughly 6000 empty units. Of the 6000 vacant properties, 3,268 were declared empty by the owners. The rest, which were not reported to the city, were deemed empty. Nearly 2,000 homeowners have filed notices of complaint, challenging the designation and the tax. The overall compliance rate for filing was nearly 99 percent and the vacancy rate is 1.8 percent.
The tax is expected to bring tens of millions of dollars into Ottawa’s coffers in the coming years — the city estimated that it would generate $25 million over five years, but with a higher-than-expected vacancy rate, that number could be much higher. The funds will be used for affordable housing, which the city desperately needs.
The VUT is a great, simple idea that matches a policy problem (a lack of housing and a surfeit of empty units) to a policy need (more housing, particularly affordable housing). The tax both nudges homeowners to rent out their empty units and generates income to build more units in the cases when they don’t. It’s an elegant partial solution to a brutal problem. Everyone ought to have access to safe, affordable shelter. Full stop. And the VUT helps get us closer to a world in which that “ought to” becomes a reality.
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The councillor opposed to the VUT is Laura Dudas, who represents Orléans West-Innes. She’s long been an opponent of the vacant unit tax. She voted against it and is now bringing a motion to City Council to end it, arguing it’s too onerous and the vacancy rate is suspiciously high compared to other cities and to initial predictions.
The VUT isn’t burdensome (it’s easy to fill out and the bureaucracy to manage it is easily worth the return). Moreover, the rate is, if anything, too low. Dudas’ motion is unlikely to pass, and Ottawa mayor Mark Sutcliffe poured cold water on the effort right out of the gate. As CTV news reports, he said
I think if we look at the numbers and make a fact-based decision, we'll be able to decide whether we want to continue with the program or not, but I don't think many of the numbers in the notice of motion, they don't seem to line up with what I've heard about what's been happening with the program.
Dudas expects to at least spark some debate with her motion. She’ll certainly get that. But the debate ought to be simple, fast, and one-sided. The VUT is the least the city can do to encourage more available rental units and affordable housing. Vacant properties tend to be owned by folks who have more than one property. Frankly, deliberately leaving homes empty during a housing crisis ought to be illegal. But that’s another conversation. In the meantime, the very least we can do is tax irresponsible owners.
The vacant unit tax works. It’s a success in its first year insofar as it’s generating revenue desperately needed to build affordable units, and in subsequent years, it has a high chance of inducing owners to put their empty units on the rental market. So three cheers to Laura Dudas for reminding us that such an important tax is doing what it’s meant to do! And a note to politicians to remember that there’s far more we can and should do to make sure everyone has a safe, affordable place to live.