Housing legislation changes often at the federal, provincial, and municipal levels, but for residential landlords, one of the most important announcements comes each year in the form of the rent increase guideline. While B.C.’s has yet to be set, the Ontario Ministry of Housing has confirmed that the rent increase guideline for 2025 will remain unchanged at 2.5 per cent, trailing inflation for the third year in a row.

“This was not a surprise given the three-year precedent,” says Paul Cappa, partner at Cohen Highley LLP. “But the decision clearly benefits sitting tenants and puts upward pressure on asking rents for those seeking new rental accommodations. Property taxes have increased in many municipalities by more than 7 per cent. The guideline does not cover extraordinary increases, and consequently, some landlords are turning to above guideline rent increase (AGI) applications to offset costs.”

Each year, the Ministry is required to calculate and publicize the rent control guideline for the following year prior to August 31^st. While the prescribed formula in the Residential Tenancies Act (RTA) would have resulted in a guideline increase of 3.1 per cent based on extraordinary inflation over the past year, instead the legislation caps the annual guideline at 2.5 per cent leaving landlords to absorb the difference. The threshold to recover an extraordinary property tax increase will remain at 3.75 per cent in 2024 and 2025—which equates to the 2.5 per cent guideline + 50 per cent.

“Landlords who faced increased property taxes between 2023 and 2024 should review their property tax expenses this summer to see if they qualify for a Tax AGI,” Cappa advises.

Same problem, different rules

For context, not all provinces follow the same rules when it comes to residential tenancies. While five provinces and one territory—including British Columbia, Manitoba, Ontario, Quebec, Prince Edward Island, and the Yukon—enforce a form of rent control, Alberta, Saskatchewan and the Atlantic provinces do not. That said, they do have their own set of rules restricting how and when residential rents can be increased. In Alberta, for instance, landlords must wait a minimum of 12 months before a tenant’s rent can be raised, but the rent increase is up to the property owner to determine. The argument in favour of this policy is that the apartment’s value is driven by the market itself, with no government intervention or restrictions creating complications down the road.

In B.C.—much like Ontario where affordable rental housing is a persistent problem—rent control has been imposed since 2017, and despite the province allowing a 3.5 per cent increase in 2024, the policy is not readily supported, particularly by those in the business of rental housing.

“Anyone truly paying attention knows that rent control leads to a decay of existing stock due to lack of funds to maintain rentals,” says David Hutniak, CEO of LandlordBC. “Over time, it reduces rental supply, leads to higher rents for future renters, and incentivizes higher-income earners to stay put, thereby reducing the availability for lower-income earners.”

Hutniak adds that if governments are truly serious about creating an over-abundance of secure and affordable rental housing, their goal should be to transition out of rent control for all rental housing (existing and new builds), over a reasonable period of time— “with appropriate tenant supports, of course.”

Other changes impacting residential landlords

Recently in B.C. and Ontario, there has been a push to dissuade landlords from engaging in wrongful evictions, triggering the development of municipal bylaws to reduce instances of “renovictions” and “demovictions”. While new rules already exist in some jurisdictions in both provinces, Cappa doesn’t feel the extra layer of bureaucracy is warranted in Toronto.

“These are just catchy phrases used by grandstanding politicians that will negatively impact the housing stock and stifle the creation of secondary units,“ he asserts. “There are already enough checks and balances in the system to protect renters without municipalities thwarting infilling and new unit creation or preventing deteriorated rental units from being repaired.”

In terms of whether any of the legislative changes coming to Ontario will have a positive impact on rental businesses—or more importantly, help create more affordable living conditions for tenants—Cappa remains dubious.

“In my view, the message is lost in the rhetoric, and common sense is unlikely to prevail,” he says. “The bottom line is, the housing stock is aging, and smaller scale properties don’t always have access to capital for repairs given the rents barely cover costs, so there is deferred maintenance.”

Meanwhile, the Landlord and Tenant Board (LTB) continues to operate in a backlog despite the significant resources that were added to address the sluggish process. In May 2023, a disparaging Ombudsman’s Report blamed the move to online hearings and the removal of in-person services in the wake of COVID-19 for creating further damage to an already broken system.

“Anecdotally, it appears they are treading water with as many new cases being filed as are being resolved, with the accumulated workload remaining unchanged,” Cappa says. “The legislation, and by extension its process, is heavily tenant centric. The mandate and discretion of the Board is too broad. Fundamental change is required to restore balance and foster a healthy and competitive rental market.”