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The cost of living in Ontario is on the rise. Regardless of whether you are paying for utilities, insurance or supplies for a home renovation, prices are rising across the board – and that includes the cost of rent.
Naturally, as the cost of owning property increases, real estate investors and landlords are going to want to find a way to avoid taking any losses. So, for many investors the obvious solution is to raise the rent.
However, it is not quite that simple. In Ontario, there are rules and regulations designed to limit the maximum amount rent can be increased each year by property owners.
So, how much can you increase the rent by each year? Let’s take a look.
But first, did you know that even when you cannot raise the rent, you may still have an option to make your rentals more profitable. To discuss refinancing your mortgage to a lower rate to increase profits, click the link below to book a free strategy call today.
Rent Control in Ontario
In Ontario, the rent increase is limited annually in order to prevent excessive increases from harming tenants. The guidelines for rent increase in Ontario dictate both when rent can be increased and the maximum percentage that it can be increased by.
When Can a Landlord Raise the Rent?
Rent can only be increased in Ontario once every 12 months or once per calendar year. However, these increases are not automatically applied each year and instead the landlord must provide their tenant with a minimum of 90 days’ notice through the appropriate form. The forms used for this process are the N1 for standard properties, and an N2 for properties that are exempt from the guidelines limiting rent increase. Additionally, landlords are not permitted to raise the rent during the first 12 months after tenancy began in their property.
Tenants are not required to accept the rent increase upon being provided notice and can instead choose to terminate their tenancy and find another unit to rent elsewhere.
How Much Can They Raise the Rent?
On top of the limits on how frequently rent can be increased in the province, the Ontario Ministry of Municipal Affairs also imposes a maximum percentage that rent can be increased by each year without approval from the Landlord and Tenant Board. This percentage is determined in relation to the Ontario Consumer Price Index. However, they will also limit their guidelines to prevent sudden increases from harming renters in the province.
In 2021, there was an exception to this process due to legislation passed by the Government of Ontario. This legislation ordered rental prices to remain frozen at their 2020 levels for the year. This freeze applied to most tenants living in the following properties:
- Rented Houses, Apartments and Condos
- Basement Apartments
- Care Homes (Including Retirement Homes)
- Mobile Home Parks
- Land Lease Communities
- Rent-Geared-To-Income Units and Market Rent Units in Community Housing
- Affordable Housing Units Created Through Various Federally and/or Provincially Funded Programs
It is also important to note that property owners are not required to raise the rent by the maximum amount outlined in Ontario’s rent control guidelines and may choose to raise the rent by a reduced amount or not at all if they choose. However, even if a property owner does not choose to raise the rent by the full permitted amount, they are not allowed to raise the rent above the maximum in the following years to offset this choice.
Rent Increase Guidelines for 2023
The rent increase guidelines for Ontario in 2023 limit rent increases to a maximum of 2.5 per cent on applicable properties.
Which Properties Are Rent Controlled?
The rent control guidelines in Ontario apply to the majority of private residential units covered by the Residential Tenancies Act. These properties are:
- Rented Houses, Apartments, Basement Apartments and Condos
- Care Homes
- Mobile Homes
- Land Lease Communities
When Does Rent Control Not Apply?
The rent control guidelines in Ontario do not apply to all rental properties. Community housing units, long-term care homes and commercial properties are all exempt from these guidelines.
Additionally, vacant rental units are not required to follow the rent increase guidelines. This allows property owners to freely raise the rent between tenants without notice or approval from the Landlord and Tenant Board.
Finally, these guidelines do not apply to rental units that were constructed or first occupied after November 18, 2018. This includes home additions and newly completed basement apartments.
Discover How To Anaylze a Properties Cash Flow With This Step By Step Guide
How is the Maximum Increase Set?
The maximum rent increase for each year is set according to the Ontario Consumer Price Index. This is a tool used to measure inflation and the economic position of the province each year. The data is typically calculated by assessing data collected between the months of June to May each year. (For example, guidelines for 2023 were determined by using data collected between June 2021 to May 2022.)
From there, the cap is set at a value designed to keep up with inflation while also not overwhelming renters with sudden, high rent increases.
Raising Rent Beyond the Guideline
If you are looking to raise the rent beyond the maximum guideline for the year, you are capable of doing so by filling out an application with the Landlord and Tenant Board for a maximum allowance of 3 per cent over the guideline for the year. Often this is used in the case of properties where significant work has been completed to improve the value of the property or a sudden increase the costs of owning and operating the rental property. This application can be either approved or denied.
These applications do not create an exemption for the 12-month minimum between rent increases.
Learn With Us
If you would like to continue learning about the world of real estate investing and finance, let us help you. Here at LendCity and the Canadian Real Estate Network we work with a wide network of lenders, investors, and real estate professionals to ensure that you have access to the most up-to-date and relevant information on the world of real estate investing.
If you would like to book an appointment to speak with a member of our team, give us a call at 519-960-0370 or visit us online at LendCity.ca. Alternatively click the link below to book a free strategy call with our team at LendCity today