Within Ontario we have a somewhat complicated system of rent control. The amount that landlords can increase rent by varies each year, it doesn’t apply to all rental properties, and even if it does apply to a property, in certain circumstances the landlord can ask to exceed the allowable increase.
Given the complexity, we thought a quick recap of how rent control works in the province would be helpful. Let’s get into it.
Every year, the Ontario government sets a rent increase guideline for the upcoming year. Despite the name, it’s actually very much defined, with whatever percentage is set becoming the maximum percentage that a landlord can increase the rent for in that calendar year without the approval of the Landlord and Tenant Board. It’s only a guideline in that a landlord can choose to increase the rent by a lower percentage, but make no mistake, it’s not permitted to go over the guideline.
In order for a landlord to increase the rent for a residential unit up to the set percentage, there has to have been at least 12 months since the last rent increase or the date the tenancy began. In addition, the landlord has to give at least 90 days notice for the rental rate increase.
Next year, 2023, the maximum permitted rental increase is 2.5% and that is actually a considerably higher percentage increase than we’ve seen in a while, even if it is still below the inflation rate. If the actual inflation rate, as measured by the Ontario Consumer Price Index, was used, rental rates would be permitted to rise by 5.3%.
It was set at 1.2% in 2022, which was after a year (2021) of no permitted rent increases. For most of the past decade, we’ve seen permitted rent increases of under 2% and the last time we saw one as high as 2.5% was back in 2013.
The guideline applies to most private residential rental units covered by the Residential Tenancies Act, 2006. This applies to most tenants, such as those living in:
- rented houses, apartments, basement apartments and condos
- care homes
- mobile homes
- land lease communities
While the above list seems pretty comprehensive, there are actually a number of housing types where the guideline does not apply.
For tenants living in any of the below types of units, there is no maximum rent increase set and no protection for tenants being hit with significant rental rate increases:
- vacant residential units
- community housing units
- long-term care homes
- commercial properties
In addition, there is a significant exception for recently built rental properties. Any new buildings, additions to existing buildings and most new basement apartments that are occupied for the first time for residential purposes after November 15, 2018 are exempt from rent control.
This is not a widely known exception and the source of significant confusion for both tenants as well as landlords. If the rental property was built and occupied as a residence after November 15, 2018, the rent can be increased by any amount the market will bear. The same 90 day notice provision applies, but there is no limit to what rent can be charged in such residences.
Whether you are a landlord or a tenant, it is important to understand the rules and regulations around rental rate increases.
We regularly work with investors and landlords, as well as helping tenants become homeowners. If you’re impacted by rental rate increases, you need to have agents who understand the current rules to best advise you on next steps. We’d love to help you navigate the market, so please get in touch with us with any questions.