Why Rent Control

A key renter protection in Ontario is rent control. Rent control provisions are found in Part VII of the Residential Tenancies Act, 2006 (RTA) and accompanying Regulation 516/06. They limit how much landlords can increase rent for residential rental properties. Their purpose is to provide renters with stable and predictable rents tied to the cost of living and protect them from unlawful rent increases. However, not all renters in rental units covered by the RTA are protected by rent control – thanks to loopholes in the legislation. 

How does rent control work? 

If your unit is covered by the RTA and first occupied before November 15, 2018, it is a rent controlled unit. This means that the Ontario government sets an annual rent increase guideline based on the Ontario Consumer Price Index (CPI). This guideline caps the maximum percentage by which landlords can raise rent each year. For example, the 2024 guideline is 2.5%. Landlords must wait at least 12 months between increases and provide the renter 90 days’ notice before a rent increase takes effect.

What are the rent control loopholes? 

There are several instances where rent control does not apply, which impacts renters and contributes to the affordable housing crisis. 

Post-November 15, 2018 Exemption: Not all rental units are subject to the annual rent increase guideline. Units occupied for residential purposes the first time on or after November 15, 2018, are exempt from the rent control guideline. This means that landlords of exempted units can increase rent by any amount annually – even if the increase is unaffordable to the renter.

Vacancy Decontrol Loophole for Vacant Units: Since 1998, rent control guidelines do not apply to vacant units. When a landlord is re-renting a unit, they are permitted to set the new rent for an incoming renter at any amount they choose. Once rented, if the unit is rent controlled, the rent increase guideline would apply to future rent increases.

Above-Guideline Increases (AGIs): In specified circumstances outlined in the RTA, landlords of rent controlled buildings can apply to the Landlord and Tenant Board (LTB) for an increase above the annual guideline, in addition to the annual rent guideline increase the renter is required to pay. AGIs are supposed to cover the cost of capital expenditures, “extraordinary” increases in municipal taxes/charges, or operating costs for security services.¹ The LTB must approve these applications, and renters have the right to participate in hearings to challenge the expenses the landlord is claiming.

The rent control loopholes are helping drive the financialization of housing. Over the past 20 years, and most acutely over the past ten years, investors have increasingly become the biggest purchasers of residential real estate, which they use to generate profits for themselves and/or shareholders. There are several ways investor landlords exploit rent control loopholes to extract as much rent as possible from their investment property – at the expense of renters. 

Incentivizing Bad Faith Evictions

Introduced in the 1990s, the vacancy decontrol loophole incentivizes landlords to push out sitting tenants in rent controlled units in order to re-rent the units at any price the landlord wants, which could be double or triple the current rent. There are several ways landlords try to push tenants out including: harassment, intimidation, letting units to fall into serious disrepair and filing bad faith landlord/purchaser own use eviction applications. Landlords may also file false applications requiring vacant possession to renovate (“renoviction”). Once the tenant is out of the unit being renovated, landlords may employ various tactics to prevent the tenant from exercising their lawful right to return after renovations are complete. Once vacant, landlords might upgrade the unit, and they will always re-rent it for a significantly higher amount.   

Circumventing the Rent Control Guideline

Established in the 1990s, and revised in 2006, Above-Guideline Increases are used by landlords to circumvent rent control guidelines and maximize their investment. Currently, 100% of capital expenses can be recouped through tenant increases (capped at 9% over 3 years, on top of annual guideline increases). 

Historically, decision makers have rationalized AGIs as a way to incentivize ‘lazy’ landlords or ‘cash-strapped’ landlords to addressed repairs and maintain housing standards. These justifications are fundamentally flawed given that landlords already have obligations under the RTA to maintain a leased rental unit in a good state of repair.  Instead, AGIs offer a legislated means for landlords to neglect their ongoing repair obligations until they become so major that applying for an AGI becomes possible.   Furthermore, smaller landlords rarely seek AGIs. They are most widely used by large and often financialized landlords such as real estate investment trusts (REITs) that openly highlight their use of AGIs (and vacancy decontrol) as investment strategies to substantially boost revenues.  

Half of 470 AGI applications from January to August 2022 were by only 20 landlords – of those, 25% of the filings were just by five landlords, four of which are financialized owners.²  Often, landlords will apply for successive AGIs to improve the appearance of the exterior and interior of their building so they can attract higher-income renters. If AGIs are granted, these costs are born by the sitting renters – many of whom are living in units in serious disrepair. 

It estimated that at least 210,000 rental homes in Toronto have been subject to AGIs.³ While they are meant to expire once the expected useful life of the capital expenditure is over (set out in O. Reg. 516/06), problematically, the onus is on tenants to apply for a rent reduction once the useful life of a capital expenditure is over. Therefore, it is practically impossible for tenants, especially when a unit is turned over to a new tenant during the lifespan of the AGI, to know when the AGI will expire.

Rapid loss of existing affordable rental housing

Thanks to vacancy decontrol, once an affordable unit is vacated, it is gone forever. This loophole is the largest contributor to the loss of existing affordable housing. As demand continues to outpace supply of rental housing, vacancy decontrol has allowed landlords to set asking rents much higher than the previous rent. This is causing asking rents to skyrocket at an unsustainable pace year-over-year putting renters in an increasingly dire situation.

This rapid loss of affordable housing far outweighs the supply of newly created units – meaning we cannot simply build ourselves out of this crisis. For example, in 2006, 73% of all purpose-built rentals had rents less than $999 per month. In 2021, only 30% of primary rentals cost less than $999 per month. This means, over a period of just 15 years, more than 500,000 affordable rental suites were lost, while only 5,866 new rentals were completed annually.⁴ 

Skyrocketing rents

CMHC’s 2023 rental market report also found that vacancy decontrol sharply increased average rents for turned over suites by 31% in Toronto and 21% in Ottawa.⁵ As asking rents jump year over year – and at a much higher rate than the annual rent increase guideline – newer (post-November 15, 2018) rentals become a very attractive investment vehicles. 

Without being restricted by the annual rent increase guideline, landlords of exempted units can increase the rent every 12 months to reflect whatever the market is asking – again pushing the rents upwards. This leaves their renters in a very precarious position as they are not sure if they can afford the next annual rent increase. 

Furthermore, many renters in exempted units are afraid to exercise their rights, such as requesting the landlord to make a repair, for fear the landlord will deem them troublesome and economically evict them by increasing their rent by an unaffordable amount. 

Increasing Demovictions

The post-November 15, 2018 exemption is also contributing to the loss of existing affordable housing. Asking rents are so high that large financialized landlords are purchasing older, purpose-built rental apartment complexes, which are rent controlled, one of the few sources of affordable housing in most cities. These buildings are then demolished and replaced with a new building whose rental units are no longer rent controlled (“demoviction”). The loss of a large number of affordable rental units in one community usually leads to the displacement of hundreds of households, many of them forced to leave their neighbourhoods because they cannot afford the asking rents driven up by vacancy decontrol. 

While the government says rent control loopholes encourage the construction of new rental housing, it does not solve the problem of affordability because many of the new units that are built tend to be high end or luxury rentals, and any unit that is built is not covered by the Rent Control Guideline so the rent could increase significantly after a year. 

The Canada Housing and Mortgage Corporation (CMHC) has maintained that housing is only affordable when it does not exceed 30% of a person’s gross annual income. Anything beyond that is considered unaffordable. Of the top 20 most unaffordable metropolitan cities in Canada, 14 are in Ontario, with the top five being Toronto, Mississauga, Oakville, North York and Etobicoke.⁶ 

Over the past thirty years, rental costs have more than doubled across Ontario. As of October 2024, the average asking rent in Toronto was a crushing $2642, $2593 in Mississauga and $2207 in Ottawa.⁷ The real costs are often even higher, given that only 42% of rents include electricity and 72% include water.⁸

Almost half of all renters in Ontario live in Toronto, where according to the 2021 Census, the median total income of renter households was $65,500.⁹ However, to afford current asking rents in the city, a renter must earn a minimum of $96,000/year for a 1-bedroom rental and earn $125,000/year for a 2-bedrooom.¹⁰ Increasingly, to ensure the rent is paid, renters are forced to sacrifice other essential needs, indicated by rising food insecurity trends such as food bank usage.¹¹ 

Renters cannot keep up with soaring rents that are completely out of step with renter incomes. Although renters have lower incomes than homeowners, they are paying a higher proportion of income towards housing costs.¹² At any given time, over half of all renters in Ontario are vulnerable to being displaced, as indicated by the 85% increase in landlord/purchaser own-use evictions.¹³ This is the result of a 30 year experiment in housing policy that has failed. 

Why are we facing this mess in Ontario? When vacancy decontrol was first introduced with the election of Mike Harris in the mid 1990’s, we were told that eliminating effective rent controls would make the creation of rental housing more profitable for developers, motivating them to add to the rental housing supply. The rationale was that an influx of rental units would lead to lower rent prices. 

Did this happen? No. The graph below shows “housing starts” after rent controls were eliminated. Keep in mind that anything built after November 15, 2018 is exempted from rent controls.

After the introduction of vacancy decontrol in 1998, there was a significant decline in rental construction in the years that followed. While the removal of rent controls were meant to incentivize developers to build 10,000 new rentals each year, on average there were only 5,626 completions annually.¹⁴

Now instead of having an abundance of rental options, we face a severe shortage with most new developments completely unaffordable for renters. As of 2022, approximately 52% of Ontario renters live in secondary rental housing (i.e. non-purpose built rental housing), 36% live in a purpose built rental and only 12% live in social or affordable housing (compared to 43%, 42% and 15% respectively in 2016). 

Currently, landlords continue to benefit while renters suffer. These policies treat housing as a profit-driven investment rather than recognizing it as a fundamental right for everyone. Ontario’s lax rent regulations attract large financial investors who are quickly acquiring affordable rental properties, displacing long-term renters, and raising rents dramatically. This cycle continues without pause. 

The situation is dire for Ontario renters and it is having an impact on all aspects of society with added demands placed on shelters, food banks, healthcare, the justice system, employment and education. Ontario does better when its residents have stable roofs over their heads. To protect existing affordable housing, curb skyrocketing rents and end housing insecurity, Ontario must close the rent control loopholes and bring back full rent control. 

Full rent control in Ontario means: 

• Eliminate the November 15 2018 rent control exemption
• Remove vacancy decontrol and bring back rent control for new leases on vacant units. Create a rent registry to keep track of rents.
• Eliminate AGIs. 

There are many positives associated with the return of full rent control including, that it is:

• The most effective way to prevent further loss of remaining affordability in market rental housing.
• A pathway towards thriving neighborhoods, stable local economies, and uplifting household well-being.¹⁵
• Relatively quick and easy to implement because it requires straightforward amendments to the RTA and its regulations.
• Inexpensive to implement because it does not require a large investment to make the amendments.
• Impactful in the short-term because landlords are required to comply with full rent control as soon as it comes into effect.
• A critical step towards equity for deserving groups disproportionately impacted by economic displacement. These groups include individuals and households who are Indigenous, racialized, women-led, survivors of gender based violence, living with disabilities, seniors, newcomers, members of the LBGTQ2S+ community, young adults, veterans, dealing with unaddressed mental health needs, and/or coping with low incomes.¹⁶

It’s time for Fair Rents! Click here to send a letter to your MPP to demand the return to genuine rent control to safeguard the interests of Ontarians.

Rent Control in the RTA: Legislation Changes Needed for Full Rent Control

Residential Tenancies Act, 2006, S.O. 2006, c. 17
https://www.ontario.ca/laws/statute/06r17 

AGIs: repeal sections 126 and 127
2018 Exemption: repeal sections 6.1 (2), 6.1 (3), 6.1 (4), 6.1 (7) 
Vacancy Decontrol: repeal section 113