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August 21st, 2018

How much can a landlord increase rent in Ontario?

Setting rent for your investment property is a fine science. Set it too high, and your property can sit vacant for months. Too low, and your earning only a portion of market value.

The same is true for rent increases - leave it flat, and the market outgrows you. Increase it rapidly and you could lose your tenants. In some cases, increasing rent by too much could even land you in legal peril.

How often can I increase rent?

In Ontario, a landlord is legally allowed to increase rent once every 12 months. However, there are some rules and regulations that must be met. First, you must deliver written notice to your tenant at least 90 days prior to the increase. Secondly, there is a limit as to how much you can raise the cost of rent.

Do note that the rental increase law in Ontario only applies to rental properties covered by the Residential Tenancies Act; vacant residential units, social housing, nursing homes and commercial properties are all exempt.

By how much can I raise rent?

The Ontario government sets the guideline for the coming year, and a landlord can only raise rent up to a predetermined amount. Usually the guideline is set by the end of each August, and is calculated using the Ontario Consumer Price Index, which measures the rate of inflation and changes to economic conditions over the course of a year. Data from June to May usually determines how the guideline will be set for the upcoming year.

For 2018, the guideline is capped at 1.8%, which will remain the same for 2019. Therefore, rent can only be raised by a maximum of 1.8% before June, 2019.

What does an increase of 1.8% look like?

Say you charge tenants $1,500 per month to rent a unit, and decide to increase rent by the maximum 1.8%. This translates to $27 per month, and $324 per year in additional income. It also means the next time you increase rent, the overall cost of rent will be compounded - i.e. it will be 1.8% of $15,027, not $15,000.

While this may not seem like a substantial increase, landlords with multiple properties will see huge income boosts when increases are applied across the board.

What about new tenants?

It’s important to note that rent increase limits apply to your current tenants only. If, for example, a tenant moves out and you use the opportunity to renovate, you can set a higher monthly fee when the unit is once again inhabitable.

Regulations are in place to prevent tenants from being priced out of their current home. When relisting a rental property, however, you can raise or drop the price however you see fit.

The Rental Fairness Act

Before the Rental Fairness Act was set, landlords of newer builds (November 1, 1991 or later) were allowed to increase rent without limit, while owners of older properties were held to a fixed increase. In 2017, The Rental Fairness Act leveled the playing field.

While the primary purpose of this act has always been to make things fair for tenants, this 2017 update made things fair for landlords who own older buildings.

As a landlord it can sometimes be hard figure out what rules and regulations apply to you. If you are concerned about your rental property, and want to know if there is room for you to increase your rental charge, you can always contact the Landlord and Tenancy board for Ontario.