When Colonel John By chose the site of Ottawa as the northern end of the Rideau Canal, he laid out two town sites, Upper and Lower Bytown. Upper Bytown was located to the west of Barrack Hill, and overlooked the Chaudière Falls. Lower Bytown was to the east, between the canal and the Rideau Falls.
From the beginning, Lower Bytown was the home of the more transient part of the population: raftsmen, lumberjacks and mill workers. Most of the rooms above the shops were hotels or boarding houses. The area was a thriving, colourful market community, populated by cobblers, blacksmiths, general merchants, grocers and many kinds of tradesmen.
By contrast, Upper Bytown boasted bankers, lawyers, doctors and upper class commercial establishments.
Fed by the booming lumber and milling industries, the towns grew quickly. By the mid-19th century, stylish shops, houses and public buildings were replacing the crudely designed buildings of the pioneer years. On January 1st, 1855, Bytown was officially incorporated as a city and changed its name to Ottawa. It had come a long way in just under 30 years.
When the news arrived three years later that Ottawa had been named the capital of the United Province of Canada, the city was mostly made up of ramshackle wooden buildings. The streets were piled high with snow in the winter, and knee deep in mud in the spring. The lumber barons lived well, but it was difficult to find a house grand enough for the Governor General. In the end, a country villa in New Edinburgh, named Rideau Hall, was rented—"temporarily". Canada's Governor General resides there to this day.