Rent Increase Guideline

Under the new Residential Tenancies Act, 2006 the Annual Rent Increase Guideline will be the percentage change from year to year in the Ontario Consumer Price Index, averaged over a 12 month period.

Background:

From 1998 to 2001, the percentage increase in total average rents in Ontario outpaced the percentage increase in both the Annual Guideline and the Ontario Consumer Price Index (CPI) due to the bonus 2% included in the guideline formula, vacancy decontrol and the above guideline rent increases (AGIs). Overall, the average rent of Ontario rental units surveyed by Canada Mortgage and Housing Corporation (CMHC) increased by 28% from 1995 to 2005; during this same period, the Ontario CPI increased by 23%.

In the city of Toronto, where a third of all Ontario tenant households reside, average rents increased by 31% between 1996 and 2005, while average weekly wages increased by 26% during the same period. The highest average monthly rent in Canada for a two bedroom apartment in 2005 was in the Toronto CMA (at $1052).

The right of tenants to apply for rent reductions when a landlord's costs are no longer borne was eliminated in the Tenant Protection Act. As a result, tenants pay permanent compounding increases for temporary cost increases such as utilities- even when such cost components are already recovered through the Rent Control Index in the Guideline formula. Under the Residential Tenancies Act, 2006, a new provision requires landlords to reduce a tenant's rent if utility costs (that were the basis for an approved AGI) decrease as described in regulation. In addition, rent reductions are required for sitting tenants when a capital expenditure (that was the basis for an approved AGI, such as a new roof), has been paid off.

Describing it as a "time out" while consulting with stakeholders on the legislation ro replace the Tenant Protection Act, the Liberal Government passed a legislative amendment suspending the automatic 2% base portion of annual rent increases for 2005. The 2006 and 2007 Annual Rent Increase Guidelines were also calculated in accordance with this amendment.