Vacant Unit Tax: He owns a derelict farmhouse. He learned he was being audited by the City of Ottawa

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Robert Templeton got tangled in Ottawa’s Vacant Unit Tax net earlier this year when he learned he was being audited over a derelict farmhouse on a property he owns.

Templeton’s father bought the property on a gravel road between North Gower and Burritts Rapids more than 60 years ago. The wood-frame house, tucked away from view, had no insulation, electricity, water or septic tank. It was uninhabitable even back then, Templeton says.

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Templeton’s brother farms the land. The house is used mostly to store firewood and lumber, with a small portion of the house used as a hunt camp for a few days every fall.

Because the house has a civic number, Templeton received a letter from the City of Ottawa telling him he had to register the house under its Vacant Unit Tax (VUT) policy, a measure passed in 2022 to require all residential property owners to register the status of their properties.

The goal of the VUT is to encourage homeowners to maintain, occupy or rent properties, increasing the housing supply in a city gripped by a housing shortage. A residential unit is considered vacant if it has been unoccupied for a total of more than 184 days during the previous calendar year.

If no declaration is made, the property is deemed vacant and subject to the tax. VUT is calculated as a percentage of the property’s assessed rate, as determined by the Municipal Property Assessment Corporation. The tax rate is one per cent of the assessed value.

Templeton says it’s obvious the farmhouse should be exempt from the tax.

“I couldn’t rent it out. I would be breaking every law possible,” he says.

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There are several VUT exemptions, including properties for sale, rural properties used as cottage rentals and properties whose owners have died or are in hospital or long-term care. Properties are also exempt if they are under extensive renovation and when there is a court order preventing the property from being occupied, but not if that’s because of owner neglect.

Templeton looked at the list for an exemption that would fit his situation, but couldn’t find one. He called and emailed nine or 10 people at the City of Ottawa. Eventually, a staffer replied and suggested that Templeton tick the box for renovations, but warned that it could come back and bite him because he had no renovation permit and no intention to renovate.

Templeton wrote on the form that the property could not be renovated.

“I made that very clear. It just didn’t fit any of the categories,” he says. “On my end, it was never going to change. I was never going to fix it up. I just didn’t register with anyone. There was no box you could tick.”

For the year 2023, Templeton ticked the same box. Earlier this year, he learned he was being audited for 2022 VUT.

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Templeton says he pleaded with city staff to look at the property and see it for themselves. No one took him up on the offer.

“If you get a fine because of a red-light camera, they have to have a picture of the vehicle. I told them, ‘You have to come and see it,’ ” Templeton says. “It has been very frustrating. It has been very time-consuming.”

The audit was cancelled only after Rideau-Jock Coun. David Brown stepped in and presented photos of the property to city officials.

The VUT has exposed a uniquely rural issue — the existence of farmhouses that have been unoccupied for decades and hunt camps and other structures that aren’t suitable for permanent occupation — Brown says. His office has fielded a few dozen questions and complaints about buildings that are clearly not habitable.

In some cases, farmers have kept old farmhouses because the electrical systems or water services are attached to the barns, he says. Some property owners fear that satellite images will indicate there are structures on their properties, even if they’re uninhabitable.

Property owners usually have only two options if they’re caught in this bind, and both can be expensive, Brown says. The first is to undergo an MPAC assessment, which might trigger a tax increase. The second is to demolish the building, which can also carry a hefty cost.

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“It may only affect a few hundred properties, but these owners have to go through an onerous process every year. The VUT is not designed to target these kinds of properties,” Brown says

That may change. The matter came up before the Agriculture and Rural Affairs Committee earlier in May. Last week, city council agreed to ask staff to look into the matter and to report back next fall on options to exempt or exclude rural structures that are unfit for occupation from the VUT declaration.

According to preliminary VUT figures for 2023, 2,671 exemptions were granted last year. About half of them were because the properties had been sold. Another 728 were exempt were because of construction or renovation, 81 were under the category of construction or renovation with tenancy, 296 because of the deaths of the property owners and 205 because the owners were in care. Another 28 exempt properties were rental cottages, and 10 were subject to court orders.

The wards with the highest number of vacant units were Somerset (298), Rideau-Vanier (291) and Alta Vista (216).

The city levied $11.47 million in VUT in 2023, says Joseph Muhuni, the deputy treasurer of revenue. That money is reinvested in affordable housing initiatives.

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Templeton is happy the audit has been dropped and hopes he won’t have to register the property every year.

“The rural part of Ottawa is vast. When you go to this length to implement something, you have think about the rural population and foresee problems like this,” he says.

“I hope it helps other people in the rural areas. I have heard of a few other cases. Hopefully we can get this clarified.”

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