Maximum Rent Increases in Ontario – Residential Tenancy Act And Your Home Rental Budget

Let’s talk about maximum rental increases in Ontario. If you rent or want to rent you’ll know rent prices have skyrocketed recently. Budget-busting rent increases mean more people are having to choose between paying their rent, paying their bills, or buying groceries. If your rent has gone up you might wonder if the increase is legitimate or just ‘greedflation’ by your landlord.

There are a number of reasons why rental costs are increasing in Ontario and the rest of Canada. However, landlords must follow the Residential Tenancy Act in Ontario if they want to increase your monthly rent. The Act is specific about how much, how often and when a landlord can increase your rent. Also, the Act clearly states how the landlord must notify you of an increase in your rent and how much time they need to give you before they increase your rent.

Rent Increases in Ontario

The average rent in Ontario in May 2023 was $2,195 for a one-bedroom dwelling. A two-bedroom apartment would set you back $2,674 per month on average. Over the last year, rents in Ontario increased by 16.7%. Unfortunately, they are likely to continue to rise in the near future.

Several factors are contributing to high home rental prices. Inflation is partially responsible for rent increases. Landlords are experiencing increases in their mortgage interest rates, property taxes, the cost to repair and maintain the units, and utilities. They pass these costs on to their tenants.

Increased demand allows landlords to charge more for their properties. In addition, with a broader pool of renters, landlords can increase their prices to new tenants.

The lack of available units is another contributor to high rent prices. Currently, there’s more demand for rental units than supply. Some of this is due to high housing prices and rapid population growth, which has increased the demand for rentals.

High real estate prices are keeping a lot of homebuyers out of the market and may be a factor in rental increases. If a landlord bought their investment property recently, the price they need to charge to cover their expenses would be higher than the price they had to charge ten years ago. So, of course, when some landlords raise the rent, others will do so as well.

Maximum rental increases in Ontario

All rent increases in Ontario must comply with the Residential Tenancy Act. Your landlord can increase your rent as long as they follow the rules in the Act. Unregulated rent increases are not permitted in Ontario.

So, how does this work? First, to ensure your landlord respects your renter’s rights, you must know whether your unit is subject to a rent cap. A rent cap is the closest thing we have to rent control. If the home you rent is subject to a rent cap, the maximum increase to your rent will be 2.5% in 2023.

There are some exceptions to the 2.5% rent cap. The exceptions are:

• Units not rented before November 15, 2018, are not covered by rent control. Your landlord can increase your rent by much more than 2.5% if you occupy a new rental as of November 15, 2018. This applies to new builds, additions to existing buildings and newly rented basement apartments.
• In-care homes such as retirement homes or long-term care homes.
• Circumstances that allow your landlord to apply for an exemption to the 2.5% maximum increase.

An increase of 2.5% may not sound like a lot. If your rent is $1,800, a 2.5% increase will add another $45 to your monthly rent. However, this increase is more than double the maximum increase of 2022. In 2022, rent increases were capped at 1.2%. With all the other price increases you’re experiencing, an increase of 2.5% can hurt.

Can the maximum rental increase in Ontario change?

The allowable rent increase is based on economic circumstances, so it can change as the economy changes. The government uses the Ontario Consumer Price Index (CPI) to calculate the guideline for rent increases.

The CPI is a tool from Statistics Canada that measures inflation and economic conditions. The tool measures inflation by comparing the costs of a basket of goods, either year to year or month to month. It measures the prices of items the average person needs to have a decent standard of living. The CPI measures the costs of:

• Food and shelter
• Clothing and footwear
• Transportation
• Health care and personal care
• Furnishings and equipment
• Household operations
• Education
• Recreation and reading
• Alcoholic beverages, tobacco and recreational cannabis

When the cost of living is rising rapidly in these categories, keeping rental increases to a maximum of 2.5% helps ensure tenants’ household budgets are not hit with extremely high rent increases.

Rental increases

Landlords must follow the process outlined in the Residential Tenancy Act to increase your rent. So, what are your rights as a tenant if your landlord is going to increase your rent? To make sure your landlord doesn’t violate your rights, they must do the following:

• They can only increase the rent above the current guideline if an exception exists.
• The landlord must provide you with 90 days’ notice.
• The notice of your rent increase must be delivered using the proper form. If not, your rent increase is void.
• The landlord can increase your rent 12 months after the beginning of the lease or 12 months after the last rent increase,

Some landlords might try to impose higher rent increases or not give you proper notice. Some may even try to raise your rent more frequently than every 12 months, citing increasing costs.

Many tenants are afraid to challenge their landlords because they fear eviction. Fearing eviction is understandable, especially since finding an affordable place to live is very difficult right now.

Knowing your rights, responsibilities, and tenant law can be helpful when renting. The Landlord and Tenant Act outlines the rights and obligations of the landlord and tenant. It also tells you where to get help if you have a dispute or feel your rights have been violated.

Is Your Rent Too Much?

With the high cost of rent, you might need help to manage your other expenses. Wage increases have not kept up with inflation, so you could fall financially behind as costs rise. If you borrow more to pay for basic expenses or have late payments on your bill or debt, help is available.

Our Licensed Insolvency Trustees at Adamson and Associates offer credit counselling, Consumer Proposals and Bankruptcy for borrowers struggling with too much debt. We will work with you to find the best solution for your debt. Call us today at 519-310-5646 to get rid of your debt so you can start fresh.