The city’s vacant unit tax is a needless burden for taxpayers

Marc Patry argues that there isn't enough transparency over how vacant properites will be rooted out and the number of new units that will be created for the housing market

Many of us will have received a letter from the City of Ottawa over the past few months. Over three pages of instructions, it explains that if we don’t fill out the forms by March 16 (this was later extended to April 30), we would get charged the “vacant unit tax” (VUT), equivalent to 1 percent of the assessed property value. (The late declaration fee was waived for 2023 but will apply in future years,)

The city’s letter tells us that the purpose of the VUT is to incentivize getting “vacant properties on the market to rent or sell” to increase Ottawa’s housing stock.

The unlucky 0.5 percent

The city projects raising $6.6 million/year for the next five years through the VUT and that the program would cost $1.64 million/year, leaving $5 million/year to invest in additional housing – amounting to $15/property tax bill (the city estimates that 330,000 residential properties would be filling out the VUT form).

At an average assessed value of $500,000, the numbers above also lead us to a total of 1,640 out of the 330,000 residences that would be subjected to the tax – 0.5% of the total.

Collective psychological stress

The city claims that filling out their form takes “less than 5 minutes”. It took me 15 minutes to go through the paperwork and find the information. This discounts the nagging feeling I was obliged to live with between the time that letter is received and the moment I submitted the on-line form is submitted (for me, three weeks).

Assuming 330,000 properties receive the form, this comes to 82,500 hours the taxpayers of Ottawa have collectively spent filling out this form (equivalent to a full-time job over 41 years).

And if this chore is put off for an average of one week by all of us, that’s a collective 6,000 years of harbouring an angina-inducing feeling of having a task with a hard deadline left undone hanging over our consciences.

Two-stage appeal quagmire

Beyond the VUT burden imposed on taxpayers, one can’t help but anticipate that many people will miss the deadline for all kinds of reasons.

What if only 5 percent of us miss the deadline? The city will get an unintentional VUT windfall from 16,500 properties, or $82.5 million.

Those folks will only discover in next year’s tax bill that the VUT is being charged to them and they’ll seek redress, costing them many hours of frustration, and maybe even need the help of lawyers to fix the error.

To address these concerns, the city established a two-stage appeal process, with paperwork, an independent reviewer, and where city staff may contact the appellant for information…I can only imagine the bureaucratic quagmire this will create.

Paper chasing

Why doesn’t the city require only those of us whose use of our residence does not meet the city’s occupancy standards to fill out the form?

“Ah!” you will reply. “They will cheat / lie / not fill it out, to avoid being taxed.”

But they can also fill it out and lie about their occupancy.

It’s easier to legally pursue those that have demonstrably lied on a form rather than those claiming to have innocently (or not) forgotten to fill out a form.

At colossal cost, the city is forcing an additional burden on 99.5 percent of its taxpayers to marginally enhance their legal position vis-a-vis a tiny percentage of taxpayers who might lie on their VUT declaration.

Catch my varied criteria if you can

But how will the city know if I’m lying on my form? Will they rely on self-appointed neighbourhood snitches to report on empty houses?

The city says it will perform audits on those having indicated that they met the occupancy standards to check if they are lying or not. It will ask for proof of residence (driver’s license, utility bills, etc.).

But which properties will be audited? According to its website:

“Properties and declarations will be selected based on varied criteria.”

That leaves a lot to the imagination. Clearly the city was not comfortable sharing those criteria publicly.

It’s entirely possible that the self-appointed “neighbourhood snitch” approach might be among those varied criteria. Will the snitches be paid? Are we really heading in a direction more commonly associated with authoritarian regimes? Who knows? The city doesn’t say.

Transparency rules

If we are to accept this intrusion into our private lives, it better be worth it.

To know if it will have been worth it, the city should provide us with a detailed report on the VUT’s first year of application. It must be clear on how much money was raised, at what cost, and how many vacant residential units have been placed on the market as a result, at the very least.

We may find balanced against the cost of the bureaucracy required to maintain it, the cost of burdening 330,000 taxpayers with paperwork and stress, and the cost of countless hours of lost time for the thousands appealing the process, the VUT will not have been worth it.

If that’s the case, the VUT program should be shut down.

Orwell . . . What can you do?

We citizens of Ottawa are generally good rule-followers. When asked to get out of the pool, we get out of the pool. And that’s just great. A functioning society needs its members to submit to reasonable authority and to stay between the lines.

But for the sake of making life easier for the city officials, the space between those lines tends to get narrower and narrower.

And in this little example of the VUT, that space just got a little narrower still.