Toronto’s rental market is on fire! Vacancy rates are consistently low and new condo units fly off the market as fast as they enter it. But is it a balanced marketplace?
Renting in Toronto
If you are a well-informed renter here in Ontario, you expect to be protected by the Residential Tenancies Act. You know that your landlord is required to maintain your unit and the common areas to an acceptable standard, give notice prior to entering your place and not interfere with your normal enjoyment of it. But imagine you are a young professional working in the downtown Toronto core. You want to live close to work and all the action and amenities the city has to offer and you’re willing to pay a premium to do so. It’s a competitive rental market downtown, but eventually, you find a nice 1 bedroom condo in your desired area and within your price range. You sign the lease and everything is wonderful until you are suddenly hit with an 18% rent increase one year later. Wait a minute! Doesn’t the RTA limit the permissible yearly rent increase? Ontario does, in fact, have a rent control policy that sets strict limits to the amount by which a landlord can raise your rent each year. The rent increase guideline in Ontario is based on the Ontario Consumer Price Index (CPI), usually calculated on a monthly basis by Statistics Canada. For example, the 2020 guideline was calculated by averaging the percentage increase in the Ontario CPI during the 12 months from June 2018 to May 2019. According to the law and even if the CPI increase is higher. The rent increase guideline in Ontario cannot be more than 2.5 percent.
These controls keep yearly rent increases in-line with the current levels of inflation – in 2018, the guideline allowed for a 1.8% increase, in 2019 it was 1.8%, and in 2020 rents can only be increased by 2.2%. Unfortunately, these guidelines only apply if your unit was first occupied before Nov. 15, 2018. Otherwise – whether you live in a purpose built apartment, a condo for rent by owner, etc. – a loophole in the Residential Tenancies Act may leave you vulnerable to uncontrolled rent increases. In the past few years, condos have accounted for more than 80% of the new supply of rental units in Ontario, particularly in large urban centers. Rents for condos are, typically higher than the rents for similar sized purpose-built units. Even with thousands of new condos put up for lease each year, the flood of young professionals and new immigrants who want to live in the city center has kept vacancy rates low. Supply can’t seem to keep pace with the demand. It’s a competitive market and, in uncontrolled buildings, prices continue to rise to reflect this demand. At the end of the day, the real issue isn’t if Ontario should have a comprehensive rent control system, or if our current rent control system should be completely abolished. The issue is that the “loophole” that exempts certain rental units from rent control guidelines is not well-understood or well-publicized. If you are a renter in Ontario, remember that knowledge is power! Landlords are under no legal obligation to inform prospective tenants that their unit is not rent controlled so it pays to do your research before you sign a lease. If your unit was first occupied prior to Nov. 15, 2018, you can be reasonably sure that you are protected by rent control, with a few exceptions. The provisions of the RTA that deal with the maximum yearly rent increase do not apply with respect to a rental unit if:
- rental units first occupied for residential purposes after November 15, 2018
- vacant residential units
- social housing units
- nursing homes
- commercial property
In these units, there is no limit to the maximum yearly rent increase.
There are some exceptions where a Landlord can apply to the Landlord Tenant Board (LTB) to increase the rent above the approved guideline. Some reasons can be:
- Property municipal taxes for the rental unit have increased by more than the guideline plus 50 percent (For example, if the guideline is 2.2%, municipal taxes must have increased by more than 3.3%).
- The landlord incurred operating costs related to security services.
- The landlord incurred eligible capital expenditures.
Other exceptions for a rent increase can be applied at any time if both the landlord and the tenant agree that the landlord will add a new service or facility such as a parking space, air conditioner, or storage locker.
It is vital to understand that even if your unit is not rent controlled, you are still protected by other aspects of the residential tenancies act. In most cases, Landlords can only increase your rent once each 12 month period and must provide you with a minimum of 90-day notice. Regardless of the time remaining on your lease, you have the right to give your notice upon notification of a rent increase. When you are considering a new rental property, you may opt to pay a higher initial rent if it offers the security of rent control. Alternatively, if you decide to rent an uncontrolled unit, you may be able to negotiate certain rent increase guidelines directly with your new landlord and include them in your lease. Building and maintaining a good working relationship with your landlord is critical if you decide to rent an uncontrolled unit. You shouldn’t be a pushover – repairs still need to get done in a timely manner, but you don’t need to make your landlord’s life difficult either. Maintain the unit well, treat the neighbors and the condo board with respect, and keep detailed records of any maintenance or service issues you may have. At Buttonwood Property Management, we work hard to foster a spirit of cooperation between landlords and tenants and our service offerings can resolve many of the headaches that crop up, particularly in private condominium rentals. We remember one client in particular who was faced with a particularly hefty and unexpected rent increase. Despite our best efforts, we couldn’t convince the landlord to reduce the rent increase to align with the recommended guidelines. The tenant was unwilling to pay the higher rent, so we worked with her to find a new unit within her budget and target area. Luckily, the new unit was even nicer and offered more amenities! We also helped the landlord find a qualified new tenant at a higher price, but the unit was vacant for a month during the transition. It’s true that landlords can use the rent control loophole in the RTA as a means of economically evicting problem tenants, but in most cases, they are simply increasing your rent to cover their rising costs. No landlord wants a vacant unit. Costs can really add up, even if the unit is only empty for 1 month. If you find yourself faced with a steep rent increase, you may be able to negotiate a compromise with your landlord, particularly if you have a good track record as a tenant. If you find yourself facing a similar situation and decide to move, we can help you find a suitable rental property in Toronto’s highly competitive market. Let our dedicated real estate professionals be part of your team! Contact us today for more details.
Want to read more? Here’s a Toronto neighborhood round-up
And here’s what you need to know about 2017’s new laws for landlords and tenants