If you’re a landlord or tenant in Ontario, you may be a bit confused about the concept of rent control and whether it applies to your property.

The current laws around rent control in Ontario is actually pretty straightforward, but there is a long and confusing history of changes in the past 25 years. It tended to change based on which political party was in control, so that meant that we saw a fair bit of flip flopping on the application of rent control.

We wrote about the current set of rules around rent control before and you’re welcome to check out that article if you want a more detailed description of how it works.

In this article, we wanted to do a dive into the actual impact of rent control and point out some key points that may not be obvious at first glance. Here we go!

Yes, rent control exists in Ontario.

Despite headlines that may make you think otherwise, rent control exists in Ontario for some rental units.

If it does apply to a rental unit, then the maximum increase a landlord can apply is 2.5%. They are allowed to do this once every 12 months and need to give at least three months notice.

While the maximum increase is 2.5%, it can be less, and often is less, than this amount. Each year a rent increase guidelines is published that is calculated using the Ontario Consumer Price Index, a Statistics Canada tool that measures inflation and economic conditions over a year. Data from June to May is used to determine the guideline for the following year, so you’ll know before the start of a new calendar year what rate is permitted.

But it doesn’t apply to all rental units.

The confusion around rent control is due to the fact that some rental units have it and others don’t, so let’s do a quick recap of the rules.

Rent control (in the form of that maximum 2.5% increase in rental rate) 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

However, rent control does not apply to:

• 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
• rental units upon turnover of a tenancy (the landlord and new tenant agree on the rent amount)
• community housing units
• long-term care homes
• commercial properties

When you talk about which rental units don’t have rent control, most people are pretty clear that a new rental is set at market rates and the landlord and tenant agree to an amount. It’s the first point above that really confuses the matter.

November 15th, 2018 is a very important date.

If you own or live in a rental unit that was built or occupied for the first time after November 15th, 2018, then there is no rent control.

Let’s say that again.

If it was built or occupied for residential use for the first time after November 15th, 2018, rent can be raised by any amount the landlord wants to charge.

This was put into effect by Premier of Ontario Doug Ford’s Conservative Government when they enacted legislation in 2018 making it the case. The rules prior to that were different, but since late 2018, this is how rent control in Ontario works.

If you are a tenant, it’s very important that you find out when the rental unit you’re considering was built or occupied for the first time. A condo building that is brand new has no rent control and if that worries you, finding one that is five to ten years old might be a better solution.

If you’re a landlord, then new construction has more appeal than existing units (assuming they were built before November 15th, 2018) for the same reason. Any buildings that were occupied after this crucial date have no rent control and once every 12 months, you can give notice that you’re raising the rent to whatever rate you want.

Just because they can, doesn’t mean they will.

If you are looking at the above from the perspective of a landlord who owns a newer property, you’re likely pretty pleased. If you are looking at from the perspective of a tenant, you might be a little alarmed.

In the absence of rent controls, it is true that landlords can raise the rent to whatever price they want. It is also true that tenants who feel the rent increase is unreasonable can choose to move out. Losing a great tenant can be expensive both in terms of vacancy while you search for a replacement tenant as well as in fees from a Realtor or other services to find the new tenant.

Where this information becomes very valuable is in situations where landlords have faced increased costs, such as property taxes, maintenance fees or utilities that have risen substantially. While there is some provision in the act to allow landlords to apply to the LTB for an increase above the guideline, it isn’t a simple process and many landlords don’t know how to do so.

By knowing that a rental unit is exempt from the rent control guidelines, landlords can instead simply choose an increased rent amount that is reflective of their current costs and the current market rates. In our experience with clients on both sides of this equation, tenants understand a reasonable rent increase if the landlord’s costs have gone up. They may not be happy about it, but if it is in keeping with what the current rental rates are in the local market, it is rare to lose a good tenant due to the increase.

Rules can change, particularly when governments change.

An important caveat when making a decision on where to live or what to buy based on rent control rules is that these rules can, and have, change over time. We have seen numerous changes over the years, most commonly when the governing party changed in the province.

Here’s a quick summary of some changes we’ve seen in Ontario around rent control.

• In 1985, the Liberal government tightened rent controls with the Residential Rent Regulation Act.
• In 1992 the New Democratic Party government passed the Rent Control Act 1992, which changed a few things.
• In 1998, the Progressive Conservative government enacted The Tenant Protection Act, which repealed the Rent Control Act.
• In 2006, the Liberal government repealed The Tenant Protection Act was repealed and replaced by the Residential Tenancies Act.
• In 2017, the Liberal government announced the Fair Housing Plan, which extended rent control to all private rental units, including ones built or first occupied on or after November 1, 1991.
• In 2018, the Conservative Government enacted legislation such that rent control only applies to rental units created and occupied prior to November 15, 2018. It does not apply to 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.

History tells us that a change in government can result in a change in rules around rent control, so be cautious when basing a decision on the current rules if a change in governing party seems like it is coming soon.

What’s the dollar impact of rent control?

When we think about no rent control, we think about landlords raising the rent by huge amounts, doubling or tripling the price the tenant was paying. While there in theory could be situations like this, as we’ve discussed above, most of the time landlords use the ability to charge whatever they want to simply charge market rents.

In essence, landlords can raise the rent to whatever the market would bear rather than have a property generating less rental income and making the landlord wish the current tenant left. If they go too much above current market rent, they risk the tenant leaving and having to pay realtor commissions or have a period of vacancy, both of which cost the landlord money.

We went through an exercise to see how much of a dollar different rent control actually would have had in one specific example. We looked at a large condo building at 16 Yonge Street in Toronto, built before 2018, where rent control has been in place since the last rule change in 2018.

Back in August, 2018, the average rental rate for a one bedroom, one washroom unit was for $2,300. Five years later, in August, 2023, the average rental rate for a one bedroom, one washroom unit had risen to $2,575, which is $275 more per month.

We did the math on how much a landlord could have raised rent over the five year period above with rent control in place. The allowable increases ranged from 0.0% (in 2021 due to COVID) to 2.5% in 2023. If a landlord had raised the rent by the allowable amount every 12 months, the current rent would be $2,482 per month.

That’s less than $100 difference than the current market rent for the same type of unit. If the building had been built in late 2018, a landlord with the freedom to charge whatever rent the market would bear, would have just charged $93 more per month.

This is just one example, but we feel it shows how rent control is, in of itself, not necessarily a huge negative impact on landlords.

We work regularly with investors and landlords and it is through analysis such as we did for this article that we recommend focusing on the fundamentals. Find a good property, at a good price, that commands good rent and provides a good ROI. A focus on avoiding rent controlled units means missing opportunities.

If you’re considering buying an income property, get in touch with us so that we can make sure you make the best decision.

When you’re in a rush, waiting is excruciating.  Even if you’re not in a particular hurry, the time spent waiting is still time you could spend on something else.  When we say that time is money, that’s actually an understatement, as you can always earn more money, but our time is finite.

A survey by research company Forrester found that 77% of consumers feel the most important thing a company can do is value their time.  Slightly below that at 75% was consumers feeling like the most important thing a company can do is not ask research companies to ask them what is most important to them.

In real estate, time is often of the essence and there are a number of ways in which we help our clients make the most of the time they spend buying or selling real estate.  Here’s a few:

• Getting your mortgage approval set up before you find the home you love.
• Preparing your home to look its best before you put it up for sale.
• Buying or selling before the market shifts and you pay more or get less.
• Seeing a potential property to buy before it sells.
• Showing a home for sale to buyers before they buy something else.
• Signing or reviewing offers before an irrevocable period expires.
• Fulfilling a financing or home inspection condition before the allotted time expires.

With all of these time pressures, it’s pretty common to find buyers, sellers and their agents rushing into motion.  It’s also common to encounter missteps and wasted effort.

In the years that we’ve been working in real estate, we’ve come up a way to make sure to value our clients’ time by following three simple rules.

Rule #1 – Go deep.

In order to avoid wasting our clients’ time, we need to understand them.  Knowing someone wants to buy a house isn’t helpful.  Knowing they need a house that has a minimum of three bedrooms, with a backyard large enough for their annual family pig roast, two full washrooms (one with a bathtub for bathing the baby), within walking distance to a well-rated primary school, no more than two transfers from a subway stop and with a garage large enough for a 2021 Ford Expedition – that’s helpful.

Rule #2 – Watch carefully.

The majority of our clients start with some thoughts or expectations on what they are looking for in the purchase or sale of a home.  They may initially think they value certain attributes or feel a certain sale price is the most important aspect of an offer.  As we work towards the purchase or sale, it is very common for their thinking to evolve.  What was crucial becomes a “nice to have” and something they hadn’t initially considered at all becomes the prime reason to say “this is the one”.  We value our clients’ time by carefully watching what matters to them as shown by their reactions and actions, not just what they say matters to them.

Rule #3 – Come prepared.

The final rule is to both work with our clients as well as work for our clients.  We will spend a fair bit of time together, doing things we need to do together.  There will be significant work, however, that our clients do not need to be present for and they shouldn’t have to wait while we do it.  We come prepared for meetings, for showings, for all aspects of the sale or purchase of a property.  When questions come up that need some work to be answered properly, we set a time for the response and let our clients focus on their lives while we focus on doing that work.

The above rules seem pretty simple but just because something is simple doesn’t mean it necessarily will get done.  We follow the above rules so that our clients have their time valued and get the results they deserve.

If you are thinking of buying or selling real estate, know that it’s a considerable investment of your time.  You should absolutely choose an agent who values your time and does the work before, during and after their time spent directly with you, to get you what you want.

If that sounds appealing, please don’t hesitate to get in touch.  We won’t waste your time, we promise.

There is a lot that goes into determining the value of a particular property but an important part of the equation is comparing it against other properties.  If you’ve ever seen someone make a mistake when choosing a comparable and then watched the negative consequences that occurred as a result, you understand how picking the right thing to compare is crucial.

Our team has done thousands of real estate valuations and it all begins with choosing the right comparables.  Here’s our three rules that must be followed in order to choose the best comparables and come up with the most accurate valuation.

#1 – It does or it doesn’t.

When we look at a property and its comparable properties, we look closely at the attributes of the properties.  There are a number of important elements to every type of property and they will play a huge role in the level of demand for the property and therefore the value we can ascribe.

For freehold homes, the characteristics that need to be considered are:

• Parking
• Garage
• Separate basement entrance
• Finished basement
• 3 bedrooms
• 2 bathrooms
• Central AC
• Usable backyard

These are all binary (0 or 1, yes or no, it does or it doesn’t) attributes of the property that are important to the majority of buyers.  A home that has all of the above attributes appeals to most buyers and, as importantly, doesn’t lead certain buyers to avoid it.

Whenever a property or comparable property is lacking in one of these binary aspects, it impacts the demand and therefore the price.  No parking?  Some buyers won’t even have it show up on their search.  Only 2 bedrooms?  Some buyers won’t even consider it.  No separate basement entrance?  Investors looking for properties with basement apartment potential won’t be in the mix.

For condo apartments, the binary attributes are:

• Parking
• Balcony
• Pets permitted in building
• Ensuite laundry

When you compare a unit against other units, these are attributes that dramatically influence the number of interested buyers.  Lots of buyers want an outdoor space and won’t consider a unit without a balcony of some sort.  For buyers with pets, moving to a building that doesn’t permit their furry family member is not an option.

#2 – It’s not all subjective.

While there are some attributes that a property either has or doesn’t have, there are a number of other objective aspects about a property.  These aspects vary between properties but they are not subjective.

Examples include square footage of the house or condo, lot dimensions (width and depth of the property) for a house, MPAC assessed value, maintenance fees for a condo (and what utilities are included), exposure (direction the house faces or the condo unit faces), non-residential neighbours (commercial or industrial units, cemeteries, utilities buildings) number of parking spots and property taxes.

Certain characteristics of a property that you would think are objective are actually relatively subjective when there is no agreed upon standard.  A den in a condo can be a full room with a proper door and closets or it can be an indent in the wall where you could put a bench.  The number of bedrooms seems like it would be an objective fact, but some “bedrooms” are too small for all but a twin bed and many buyers would consider it to not be an actual bedroom.

Even within objective aspects such as square footage, elements such as layout play a big part in the value a buyer ascribes to the objective aspect.  A 1200 sf, three store townhouse with 400 sf eaten up by stairwells and landings can “feel” smaller than a 900 sf, single level condo apartment.  Regardless, we can try to use objective facts to compare otherwise different properties and limit the subjective aspect to a more general discussion.

#3 – Looks matter.

Finally, the design, finishes and level of upkeep can dramatically impact the value of a property.  Yes, looks do, in fact, matter.

While this is most often seen in condo buildings where you can view identical units on different floors and find one appealing and the other a disaster, freehold homes often have similar layouts to each other as well.  Just like with condo units, one house can feel airy and bright while another house with a similar layout can feel drab and uninviting.

The appeal of a property is definitely more on the subjective side of the equation, as one person’s disaster is another person’s dream.  In a broad sense, however, we can say that how a property feels and looks has a significant impact on the number of interested buyers.

A property that has ticked all of the boxes in terms of must-have, binary factors, as well as has nice finishes and has been kept in good shape is likely to attract the most buyers.  There are a significant number of buyers who only want to buy move-in ready properties.  As the required work to update or upgrade a property becomes less cosmetic and more significant, the number of interested buyers decreases.

As importantly, the more work that needs to be done, the more the level of uncertainty about the costs rise.  The reason flippers and contractors are often the winners in a multiple offer situation is not simply because they have more money.  It’s because such knowledgeable buyers understand the actual likely cost of the work and aren’t putting in a safety buffer that a more typical buyer might feel is necessary.

The work of comparing a particular property (whether for sale or to make an offer) involves taking these three considerations into account and then crunching numbers.  While it is most definitely not a strict formula, the output we need to give our client is without a doubt a number.  In most cases, it is a fairly tight range with a price that would be great to get as well as either a price we shouldn’t go below (when selling) or above (when buying).

If you are looking to buy or sell real estate, you owe it to yourself to work with someone who takes pricing extremely seriously.  Please don’t hesitate to get in touch with us and we’ll move you forward.