How Do Rent Increases Work?

As if rent prices weren't already high enough, your landlord might be getting ready to increase your rent. The truth is, landlords are within their rights to increase rent, though there are limitations to what they can do.

Nevertheless, having to pay more every month in rent can take a bite out of your budget. So, how exactly do rent increases in Ontario work?

Rent Prices Across the GTA

In case you haven't noticed, rent prices across the GTA have soared over the recent past. It almost makes you wonder if paying a mortgage may be more affordable than paying rent, especially if you need a lot of space to house a growing family.

Check out the current average rent prices for a 1-bedroom unit in the following centres:

• Toronto - $2,375

• Mississauga - $2,300

• Brampton - $2,100

• Vaughan - $2,350

• Markham - $2,300

• Richmond Hill - $2,400

If you're looking for a 2, 3, or even 4-bedroom home to rent, the rent prices are much more expensive. Again, rent prices rival mortgage payments in many cases. The housing affordability crisis is certainly affecting both homeowners and renters alike.

2023 Rent Guidelines in Ontario

Every year, the Ontario government establishes rent increase guidelines for landlords to follow. Owners of investment properties are not allowed to arbitrarily increase rent prices as they see fit. More specifically, they cannot increase rent beyond a specified limit, nor can they increase rent more often than the law allows.

For 2023, the cap on rent increases in Ontario is 2.5%. That means your landlord can only increase your rent by a maximum of 2.5%.

For instance, if you're currently paying $1,800 per month, the most your rent can increase is $45. That means your rent would now be $1,845 per month.

Further, landlords are only allowed to increase rent once every 12 months. So, if your rent was increased just 8 months ago, your landlord must wait at least another 4 months before increasing your rent again. They must also give you advanced written notice before your new rent kicks in.

These guidelines are based on the province's Consumer Price Index, which is a measure of inflation calculated every month by Statistics Canada. The data used for the calculations reflect the past year's economic conditions. Recent inflation has prompted a rent increase for 2023.

In fact, the original proposed rent cap was 5.3% based on economic conditions. But the guideline was modified to help protect renters from significant spikes in rent.

Rent Increases Prompted By Increase in Carrying Costs

It's understandable why landlords would want to increase rent. Not only do they want to earn a greater profit, but they also want to be able to cover their carrying costs.

It's no secret that the cost to acquire and maintain real estate is increasing at a fast pace these days, and landlords need to be able to cover these increasing costs. One way to do that is to increase their rent.

For instance, in 2022, Toronto's property tax increase was 2.9%, plus the 1.5% increase in the city building levy. And for 2023, Toronto property owners could be seeing a possible 3% tax hike for water, wastewater, and waste.

What To Do If Your Landlord Unfairly Increases Your Rent

As mentioned, landlords in Ontario are only allowed to increase your rent once a year and within specified guidelines for the current year. If your landlord asks for more than the allowed amount, you have some recourse.

For starters, consider speaking with your landlord first before taking any further action. If you've been a model tenant who has always been on time with rent payments, you may be able to convince the landlord to leave your rent as is, or at least opt for a lower rent increase.

 If you don't get anywhere with a conversation, you can file a complaint with the Landlord and Tenant Board (LTB).