Ontario caps rent increases at 2.5 per cent for 2023, the highest cap in nearly a decade

Tenants in rent-controlled Ontario homes may see their bills increase by as much as 2.5 per cent next year, with the province announcing the highest rent cap in nearly a decade amid soaring inflation.

The cap applies to most private rental units across Ontario, though rent control laws don't cover rentals that were first occupied after Nov. 15, 2018. It's a marked increase from the 1.2 per cent maximum allowed in 2022 - but the province says its lower than it could be given inflation rates.

The annual maximum is determined using Ontario's Consumer Price Index, a monthly inflation marker. With inflation skyrocketing lately, the province said that index suggested a cap of 5.3 per cent - but the maximum increase had been capped at 2.5 per cent to avoid tenants facing significant" rent hikes.

Across the country, households are grappling with record-level inflation, which has increased the cost of trips to the grocery store or stops at the gas station. Canada's annual inflation rate jumped to 7.7 per cent in May, which was the highest seen since January 1983, Statistics Canada said. The jump was largely attributed to higher gas prices - with gas excluded, the consumer price index went up 6.3 per cent.

But while the rent cap announced Wednesday is below the rate of inflation, it's the highest allowed in Ontario for nearly a decade, with a 2.5 per cent increase last permitted in 2013. The 2023 rate comes two years after the province enacted a rent freeze - or zero per cent cap - in response to the pandemic.

At Queen's Park, interim NDP Leader Peter Tabuns said the cap is too high for many renters, as inflation erodes their incomes.

I talk to tenants all the time in my riding. They are not getting pay increases. They're not getting two and a half per cent. They're not even getting one per cent," Tabuns said.

They are going to have a very tough time."

It's a concern shared by Cole Webber, a legal clinic worker and housing advocate in Toronto's Parkdale neighbourhood, saying a 2.5 per cent rent increase is not something that working class people are able to afford at a time when inflation is so drastically high."

Across the whole rental market, he noted the average market cost to rent went up faster than the provincial increases - since landlords are able to increase rents by any amount between different tenants, as well as apply to the Landlord and Tenant Board for above-guideline hikes.

In the decade from 2012 to 2022, city data shows the average market cost for a one-bedroom unit in Toronto went up 48 per cent, which includes all market rental properties and not just those listed for new tenancies.

Tony Irwin, president of the Federation of Rental-Housing Providers of Ontario, said he recognized the challenge that record-high inflation was presenting in people's lives - but noted that landlords' costs, from utilities to maintenance, had also been on the rise.

That impacts different-sized operators differently. Certainly, smaller landlords, it's tougher for them to withstand the mounting costs," he said.

The 2.5 per cent bump is not mandatory or automatic. Tenants who've lived in their homes for at least a year are required to receive at least 90 days' notice from their landlords if their rent is set to increase.

With files from Jacob Lorinc and Rob Ferguson