What You Need to Know About Rent Control

If you're renting in Ontario, you've probably heard about rent control. But what does it actually mean? How does it work? And does it apply to your apartment? With rents so high these days, it's important to understand how rent control can affect you.

What is Rent Control?

Rent control in Ontario is a rule that limits how much a landlord can raise your rent each year. This helps keep rent increases fair and manageable. For 2024, the maximum rent increase is set at 2.5%.

How Rent Control Works

In Ontario, landlords can only raise your rent once every 12 months. They must give you written notice at least 90 days before the increase. If you're paying $1,500 a month in rent, a 2.5% increase would add $37.50, making your new rent $1,537.50.

What Rentals are Covered?

Not all rentals are covered by rent control. If your unit was first lived in after November 15, 2018, it’s not subject to rent control rules. This includes new buildings and newly converted spaces like basements or attics. Units in co-ops, social housing, and rent-geared-to-income housing are also not covered.

Exceptions to Rent Control

Landlords can ask for a bigger rent increase if they have extra costs. These costs might be due to major repairs, higher property taxes, or new services like security. Landlords need to apply to the Landlord and Tenant Board (LTB) to get approval for these increases. If approved, they can add up to 3% more per year on top of the usual increase.

Impact on Tenants

1. Annual Rent Increase

The Ontario government sets annual rent increase guidelines to ensure that landlords cannot raise rent as much as they want. For example, in 2024, the maximum rent increase that’s allowed is 2.5%. This means that landlords can only raise rent by a specified amount, providing tenants with assurance and financial security. For example, if you’re paying $1,500 per month in rent. under the 2.5% annual increase guideline, your rent could rise by up to $37.50 per month in 2024. Without rent control, landlords could potentially impose much larger increases, making housing unaffordable for many tenants.

2. Not all Housing is Rent Controlled

Rent control does not apply to tenants living in newer buildings. Rent control only applies to units occupied before November 15, 2018, leaving tenants in newer buildings vulnerable to higher rent increases.

3. Above Guideline Increases (AGIs)

Landlords can apply for Above Guideline Increases (AGIs) to cover significant costs such as major repairs or increased property taxes. While these increases have to be approved, they can lead to rent hikes beyond the annual guideline, impacting tenants' affordability.

4. Risk of Renovictions

Renovictions, where landlords evict tenants under the guise of extensive renovations, pose a threat to tenants' housing stability. Despite regulations in place, some landlords exploit this loophole, leading to displacement and uncertainty for tenants.

5. Rental Availability

Rent control can influence the availability of rental units, as some landlords may convert their units or sell properties to circumvent rent control regulations. This reduction in rental housing supply makes the housing affordability crisis even worse, making it challenging for tenants to find suitable accommodations.

Challenges for Landlords

While rent control protects tenants, it can create challenges for landlords. Here are some of the key issues landlords face:

1. Rising Maintenance and Operating Costs:

Landlords have to deal with increasing costs for maintenance, repairs, and property taxes. Rent control limits how much they can pass these costs onto tenants, making it harder to maintain their properties.

2. Above Guideline Increases (AGIs):

To cover extraordinary expenses, landlords can apply for AGIs, but the process is complex and time-consuming. They need to prove that their expenses qualify for an increase beyond the standard limit, and even then, tenants often challenge these increases, leading to legal battles.

3. Renovictions:

Landlords might evict tenants under the pretense of needing to do significant renovations ("renovictions"), but this can backfire. Tenants and advocacy groups are becoming more aware and are challenging these evictions, creating additional legal and financial hurdles for landlords.

4. Vacancy Decontrol Issues:

When a tenant leaves, landlords can set the new rent to market levels, but this can be a double-edged sword. While it allows for potential higher income, it also increases tenant turnover and associated costs with re-renting and potential vacancies.

5. Investment Discouragement:

The restrictions and complexities of rent control can discourage potential first-time investors, landlords, and developers from investing in rental properties. Many prefer to build and sell housing properties instead, reducing the availability of rental units in the market.

6. Financial Strain:

Increased costs to maintain a rental property without corresponding rent increases can strain landlords financially. This might lead to deferred maintenance or even selling properties, further reducing rental stock.

Impact on Development

Rent control can impact the construction of new rental units. Developers might hesitate to invest in building new rental properties if they are concerned about potential restrictions on rent increases. This can lead to a shortage of rental units over time.

A report from the Federation of Rental-Housing Providers of Ontario (FRPO) shows that nearly 224,000 rental units were built in Ontario between 1960 and 1979. But from 2000 to 2022, fewer than 24,000 rental units were constructed. This decline is partly blamed on rent control policies.

Navigating Rent Control

It's important to know if your unit is covered by rent control. If it was first occupied before November 15, 2018, it's covered. If it was first occupied after that date, it isn't. If you have a dispute about rent increases, you might need legal advice. The Landlord and Tenant Board can help, but be prepared for a wait. They currently have a lot of cases, so it might take time to get a resolution.

In a Nut Shell

Rent control is an important aspect of renting in Ontario. Knowing how it works can help tenants navigate the rental market better and landlords manage their properties more effectively.