The Canadian capital, Ottawa, plans to introduce a Vacant Unit Tax (“VUT”) based on the occupancy status of a residential property in 2023.

According to the City of Ottawa, the VUT is intended to motivate homeowners to occupy or rent out their properties, helping to address the affordable housing crisis. It is expected that the net revenue from this tax will be used to support the city’s affordable housing initiatives. Once implemented, the vacant property tax will be calculated at a rate of one percent, applied to the assessed value of the property as used to calculate annual property taxes.

Similar taxes have recently been implemented in cities such as Vancouver to curb speculation and vacancy, but despite this measure, the housing situation in popular and hot real estate markets has not improved.

It appears that smaller cities and towns in Canada are now following suit to prevent homes from being purchased as an investment rather than a rental property. Cities like Ottawa are implemeting measures like the VUT to discourage property vacancies as prices continue to skyrocket in major cities, driving investors possibly to other less expensive cities. If this turns out to be a trend and more Canadian cities or municipalities implement such a tax, owners of property only used occasionally – for summer and winter vacations in Canada, for example – may have to pay a substantial tax for the luxury of short-stay use.

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