landlord & tenant rent increases - the law

 By the time of his 1975 re-election, Ontario Provincial Premier Bill Davis had been forced to change his strong stance against rent controls. Pressured by the rising popularity of the left-leaning National Democratic Party (NDP), which strongly favoured controls regarding unprotected tenancy deposit claims , Davis attempted to bridge the gap between his Conservative party’s free-market values and an urban population that had been buckling under rent hikes that had jumped an average 13.3% in Toronto the previous year.


In November of 1975, housing minister John Rhodes introduced the Residential Premises Rent Review Act, legislation that set a limit of 8% on rental rate hikes, in addition to establishing a rent review board that would review appeals from landlords wishing higher increases.

With guidelines that were set to rise or fall based on the the yearly consumer price index, the ceiling on rent hikes fluctuated between 6% in 1976 and 3% in 1998.


In 1998, the highly contentious Conservative government of Premier Mike Harris, in the midst of what it called its Common Sense Revolution, imposed Ontario’s first ever system of “vacancy decontrol” as a part of its new Tenant Protection Act. The legislation attempted to loosen price restrictions on developers and landlords:

 
“Intertenancy rent de-control provides for the temporary de-control upon vacancy of the controlled rent on a unit and the re-control again at a new negotiated rent upon occupancy by a new tenant. Existing tenants in this system are protected from eviction and rent increases on their unit are controlled.”


This meant the landlord could raise the rent as much as he wanted in-between tenants, but had to stick to the province’s yearly guidelines for any future rent hikes with new and previously existing tenants.

 
Five years later in 2003, Liberal party leader Dalton McGuinty won a majority government by taking advantage of a backlash against a Conservative party that had slashed spending for social programs, especially in housing. Part of his party’s platform was to repeal the so-called Tenant Protection Act. Prior to the election, McGuinty stated:

 
“I want to be clear about our plan for rent control. We will repeal the Harris- Eves government’s Tenant Protection Act and bring back real rent control that protects tenants from excessive rent increases. We will get rid of vacancy de-control which allows unlimited rent increases on a unit when a tenant leaves.”


Though it took four years to write and pass the legislation, McGuinty’s Liberal party passed the Residential Tenancies Act (RTA) in early 2007. In addition to making it harder for a tenant to be evicted, the bill had two provisions specific to rent pricing:

 

Guideline increase

120.  (1)  No landlord may increase the rent charged to a tenant, or to an assignee under section 95, during the term of their tenancy by more than the guideline, except in accordance with section 126 or 127 or an agreement under section 121 or 123. 2006, c. 17, s. 120 (1).

 

Guideline

(2)  The guideline for a calendar year is the percentage change from year to year in the Consumer Price Index for Ontario for prices of goods and services as reported monthly by Statistics Canada for the tenancy deposits prescribed information, averaged over the 12-month period that ends at the end of May of the previous calendar year, rounded to the first decimal point. 2006, c. 17, s. 120 (2).

 

Maximum increase

(3)  A landlord shall not increase rent charged under this section by more than the guideline plus 3 per cent of the previous lawful rent charged. 2006, c. 17, s. 121 (3).

 

http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_06r17_e.htm#BK129

 

In addition, the act laid out the specifics that allowed a landlord to increase rent above the stated yearly guideline:

 

Agreement

121.  (1)  A landlord and a tenant may agree to increase the rent charged to the tenant for a rental unit above the guideline if,

(a) the landlord has carried out or undertakes to carry out a specified capital expenditure in exchange for the rent increase; or

(b) the landlord has provided or undertakes to provide a new or additional service in exchange for the rent increase. 2006, c. 17, s. 121 (1).

 

A landlord could also apply for an increase above the legal rent if:

 

“…their costs for the municipal taxes or utilities have increased by more than the guideline plus 50 per cent. “

 

http://www.ltb.gov.on.ca/stdprodconsume/groups/csc/@ltb/@keyinfo/documents/resourcelist/stdprod_088485.pdf

 

Despite McGuinty’s promises, the RTA did not do away with the Tenant Protection Act’s intertenancy rent decontrol. As was the case in 1998, a landlord would still be able to raise the rent as much as he chose once the rental unit became vacant.

 

Under the RTA, the last two years has seen both the lowest allowable rent increase – 0.7% in 2011, and the highest – 3.1% for 2012. This last number, predictably, has brought condemnation from both housing advocates — who claim it’s too big a hike, and from landlords and property owners — who claim its not high enough to compensate for rising energy costs.

 

Currently, the McGuinty government is trying to pass an amendment to the 2006 RTA that, though still tied to the Consumer Price Index, would see a ceiling on rent increases of 2.5% and a floor of 1%. (The amendment states, again, that the guidelines do not apply to vacant residential units.)

 

http://news.ontario.ca/mah/en/2011/12/stabilizing-the-rent-increase-guideline.html

 

Regardless of legislative initiatives or amendments, the city of Toronto – the fifth largest in North America – will have to continue to work with its provincial counterparts to combat the ever-shrinking supply of rental units and aging buildings.

 

Alongside New York City, Toronto has a long and predictably controversial history with rent control. Despite having a relatively huge amount of breathing space compared to Manhattan, the city of Toronto continues to deal with the challenges of keeping its lower-income citizens in affordable housing while at the same time maintaining a vibrant market for rental housing.

 

Expect the debate to rage on.