Ottawa’s finance and economic development committee gave the thumbs-up Tuesday to a proposed tax on vacant residential properties in an effort to boost the city’s rental housing supply.
Under the proposal, owners of residential properties that are vacant more than 184 days a year would pay a one per cent tax tacked onto their annual property tax bill. The tax would not apply to an owner’s principal residence but rather to buildings that serve primarily as income-generating rental properties.
The committee directed staff to develop a tax regime that would be implemented in 2022, with billing to start in 2023.
City staff estimated that the proposed tax would bring in about $6.6 million in additional revenue in its first year. A staff report said the tax isn’t designed to be a financial windfall for the city – instead, it’s aimed at boosting the city’s inventory of rental units and reducing the number of vacant homes that are derelict or in a state of disrepair.
Vacancy rate rose in 2020
According to the Canada Mortgage and Housing Corp., Ottawa’s rental vacancy rate was 1.8 per cent in 2019, up slightly from 1.6 per cent the year before.
The rate surged to 3.9 per cent in 2020 as thousands of new apartments flooded the market at the same time as the city’s population of students and recent immigrants plummeted, but rents still rose 4.5 per cent, with the benchmark two-bedroom rate spiking 5.2 per cent to $1,517.
CMHC said vacancy rates are projected to return to pre-COVID levels within the next two years.
Full council will consider the proposal at its next meeting on June 9.