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Thursday was the first big deadline day for a new tax targeting vacant residential properties but its future remains an open question as council assesses how the first year of the program has shaken out.
Positioned as a way to discourage property owners from having homes sitting vacant during a housing crisis, and to bring in new revenue the city will use to fund affordable housing, the rollout of the vacant unit tax (VUT) has been far from universally popular.
Owners of residential properties that sat vacant for more than 184 days in 2022 will be taxed an additional one per cent of their property’s assessed value — unless they qualify for one of the program’s exemptions.
For a home determined by the Municipal Property Assessment Corporation (MPAC) to be worth $500,000, for example, that means an additional $5,000 on their property tax bill.
But the tax will also apply to those who don’t submit the paperwork to declare occupancy of their property or to declare which exemption they qualify for, if any.
The hard deadline, after which properties will be “deemed vacant” arrives on April 30. Normally, residents would also face a $250 late fee if they hadn’t filed their VUT declarations by March 16 – but for the program’s first year, that fee has been waived.
Orléans West-Innes’ Laura Dudas is the only councillor returning from last term who voted against the VUT when it was passed in the spring of 2022.
She said Thursday via email that she remains hopeful this is the only year the VUT declaration is something all Ottawa homeowners are required to complete.
“While I appreciate the overall intentions of the Vacant Unit Tax, I simply cannot support the administrative requirements. To compel 330,000-(plus) Ottawa homeowners to actively declare the status of their property — with the aim of catching at most, a few hundred or thousand vacant units, seems incredibly heavy-handed.”
While other councillors this newspaper contacted Thursday were hopeful that the program, as crafted, would prove effective enough to be worth continuing, they also observed challenges with the VUT rollout and are eager to consider the results of year one.
Last December, Dudas and West Carleton-March Coun. Clarke Kelly put forward a motion, which passed unanimously, to have staff report back data from the VUT rollout in two rounds. The first figures will come to council by the end of June and the second round before the end of October, as the formal complaint and review process associated with the program will stretch into the fall.
Council will learn, among other data points, how many units were declared or deemed vacant through non-filing of paperwork, how many owners tried to challenge the tax’s application in their case and how much the city spent on the program.
The councillors’ motion pointed to a preliminary estimate that the VUT would apply to fewer than 2,500 units. Last year, staff projected that the new tax could generate roughly $5 million annually over its first five years for housing programs. Other cities, including Toronto and Vancouver, have adopted their own versions of a VUT.
As of Thursday morning, the city had received 311,000 occupancy status declarations, or roughly 96 per cent of the total required, according to Lance Nowak, program manager of revenue support.
Knoxdale-Merivale Coun. Sean Devine said he wasn’t surprised that the launch of the VUT came with criticism and some challenges, given it’s a new taxation program. He’s supportive of the tax and the intentions behind it but does worry about the complexities of individual situations and that some people might wind up paying this tax who were not its intended targets.
“I am confident that from any review of the program, we’re going to be able to make changes and make things better,” Devine said.
But that doesn’t mean all criticism of the program will find a sympathetic ear in the councillor’s office. Devine recalled one rural-area resident who flagged their concern that their second residence in the city, only used in the summers and really just for its garage to store a vintage automobile, would be subject to the VUT.
“You are exactly the intended person of this tax,” Devine said.
“Many people object to it on grounds that perhaps have grounds, and some people object to it just because I think they would not want to pay it.”
As for the mayor’s office, Mark Sutcliffe wasn’t making any commitments Thursday about the future of the VUT program. He said he’s bringing an open mind to what comes out of its review, though he was encouraged by the number of declarations submitted by residents thus far.
“(That) suggests to me that the system’s working, and that the communication has gotten through to people, and that the process is manageable.”
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