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Ontario Government Proposes Changes to the annual Rent Increase Guideline

December 8th, 2011 · 3,828 Comments · ontario landlords association, Ontario Residential Tenancies Act, rent

 The true north strong and free!

We live in a free country, right?  A first-world capitalist nation.  Democracy.  We are the “true north strong and free!”

Except if you are a landlord in Ontario.

If you are a landlord in Ontario you live under conditions known as ‘rent control.’  This means you can’t raise the rent as the market dictates for your current tenants.  Instead you have to follow the government guideline.

So what has the government guideline been over the years?

That’s a great question.  Let’s take a look.

2001 – 2.9%

2002 – 3.9%

2003 – 2.9%

2004 – 2.9%

2005 – 1.5%

2006 – 2.1%

2007 – 2.6%

2008 – 1.4%

2009 – 1.8%

2010 – 2.1%

2011 – 0.7%

2012 – 3.1%

It’s that 3.1% increase that has the Ontario government scrambling!  After all, it’s so much higher than previous years.

But if you combine 2012’s 3.1% with 2011’s 0.7% it’s still really low, right?

Yes, you are correct.  However the 3.1% increase let then Minister Bartolucci to act like he stepped on a land mine.  Oh, he was upset. He promised if his Liberal government was re-elected they would re-vamp the who system due to this ‘outrage.’

Liberals have introduced new legislation capping any future rent increases to…drum roll please….2.5%

On Monday the Liberals introduced a Bill saying they will cap the guideline at a maximum of 2.5% and will create a floor at 1%.

The Housing Ministry website states:

Tenants would benefit from greater certainty that would ensure affordable and stable rents so they have safe and affordable housing. For landlords, this would ensure a fair return so they can properly maintain rental properties.

Does this make sense?

What if inflation rises to 5, 6 or 7%?  How can landlords deal with this if the rent increase is capped at 2.5%?

So what does the government say?

The Minister of Housing in Ontario wrote a letter to the Ontario Landlord Association.

Here’s her letter.

 

Ministry of Municipal Affairs and Housing

Office of the Minister

777 Bay Street, 17th Floor

Toronto ON M5G 2E5

Tel. 416 585 7000

Fax 416 585 6470

www.ontario.ca/MAH

 

December 6, 2011

Ontario Landlord Association

Ontariolandlord@execs.com

Dear Colleague,

I am writing to you that today our government introduced proposed legislation to amend how the annual Rent Increase Guideline is calculated under  the Residential Tenancies Act (2006) RTA.

The annual rent increase guideline is based on an objective and transparent measure – the Consumer Price Index (CPI) for Ontario – which is compiled by Statistics Canada.  The Rent Increase Guideline is calculated by averaging the percentage change in the CPI during the previous months from June to May.

While this formula worked well in the past, recent economic conditions have caused fluctuations in the CPI.  This has produced guidelines that do not reflect the economic circumstances of those who rent.

Our government is proposing that the current formula be retained, but that the annual Rent Increase Guideline be capped at two and one-half percent.  If passed, the legislation would also ensure that the guideline would never fall below one percent.

The proposed amendments, if passed, would reduce the potential volatile effects of the CPI, while providing stability and predictability for both renters and landlords during these uncertain economic times.

The amendments, if passed, would also help ensure that rents remain affordable and stable for nearly one million tenants across Ontario, while recognizing that modest rent increases are necessary for landlords so they can properly maintain rental properties.

If passed by the legislature during the Spring 2012 legislative session, the revised formula would be used to calculate the Rent Increase Guideline beginning in 2013.

Our proposal would also require that the Ministry review the Rent Increase Guideline formula every four years to determine the effectiveness of the new changes as economic conditions evolve.

The proposed legislative amendments will be available to on the Legislative Assembly website (http://www.ontla.on.ca) in the next few days.  I encourage you to visit the website, as there may be an opportunity to provide comments on the proposed amendments if the Bill if referred to Committee.

Sincerely

 

Kathleen Wynne, Minister

What do you think?  Still want to invest in rental in Ontario?

Think about it carefully.
There’s a great thread about this at the Ontario Landlord Association Advice forums here

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