In an interview with CBC News, Duffy said the issue has become a "major distraction" from the work he's trying to do for Prince Edward Island, the province he represents in the Senate.
"Everywhere I go, people are talking. Well where do you live? What's it all about? …," he said. "It's become a major distraction.
"So my wife and I discussed it, and we decided that in order to turn the page, to put all this behind us, we are going to voluntarily pay back my living expenses related to the house we have in Ottawa."
Duffy blamed the Senate for having unclear rules and forms.
"We are going to pay it back, and until the rules are clear — and they're not clear now, the forms are not clear, and I hope the Senate will redo the forms to make them clear — I will not claim the housing allowance."
'Entitled to be a senator'
Asked how much that was, Duffy indicated he wasn't sure.
"The accountants … you know," he said.
Senators are eligible for up to $21,000 a year to cover the expense of having a second home in the National Capital Region. He was appointed to the Senate in December 2008.
Duffy and several other senators are facing questions over their residence after media reports pointed out some long-time Ottawa residents seemed to be claiming the living allowance for their Ottawa homes. The allowances are intended for senators who maintain full-time residences in their home provinces.
Duffy referred to health problems as a reason why he spends so much time in Ottawa.
"I had open heart surgery," he said. "I'm being intensively followed. The other day I counted up, I have six different doctors … so I have a lot of health problems, and the advice of my doctors was not to make a switch, to stay with them at the Heart Institute in Ottawa. And that's what I've done."
The senator says he hopes the interview helps people understand the issue.
"I hope it reassures islanders and Canadians that the old Duff, the Duff they've known and trusted, would never do anything wrong. I would never knowingly fiddle anything," he said.
"Four years ago, I was given the opportunity to sit in the Senate as a voice for Prince Edward Islanders in Ottawa. I jumped at the chance. I was born here, I was raised here, I own a house here, I pay property taxes here, and most important, my heart is here."
A senior government official says "the government has no doubt whatsoever about Senator Duffy's qualification to represent P.E.I. in the Senate."
Duffy has lived in Ottawa since the 1970s, where he covered Parliament Hill as a reporter.
Duffy faces the additional question of whether he qualifies to be a senator if it's determined that he doesn't live in P.E.I. The Constitution says senators must "be resident" of the province or territory which they represent, but it doesn't say what that means.
"I'm an Island resident, and I'm entitled to be a senator," Duffy said. "I've met all of those requirements."
The residency form senators have to fill in is vague, Duffy said, "and I may have made a mistake in filling in that form."
"It asks for your primary residence in the province in which you reside, and I put Cavendish, and it asks for your secondary residence and I put Kanata," he said, explaining there are no other options on the form.
The expenses of Duffy and two other senators, Patrick Brazeau and Mac Harb, are being audited by an outside accounting firm. A report on senator living expenses by the committee that handles budgets and administration is expected by the end of the month.
David Tkachuk, who chairs the committee that oversees the Senate's budgets and administration, said Friday that the committee had not formally heard from Duffy.
Tkachuk said that members of the steering committee would meet next week to discuss the issues.
Asked Friday about Duffy's apparent mea culpa, Senator Marjory LeBreton, the government leader in the Senate, would only say that the audit would get to the bottom of the controversy.
"We have committed to ensuring that all expenses are appropriate, that the rules governing expenses are appropriate, and to report back to the public on these matters," she said.