Residential Tenancy Reform Consultation Paper

Rents for new tenants
RESIDENTIAL TENANCY REFORM CONSULTATION PAPER
Under the current system, introduced by the Tenant
Protection Act, 1997 (TPA), most rent increases are
limited by the annual rent increase guideline. However,
when a rental unit becomes vacant, there is no limit to the
amount of rent that can be charged to the new tenant.
This is commonly referred to as “vacancy decontrol.” When
a tenant moves, he/she must choose from among vacant
units that are “decontrolled” and which may be renting
for considerably more than the tenant’s existing unit.
Background:
The current system of vacancy decontrol allows the market
to determine the rent for vacant units. It has been argued
that:
a) this gives greater incentives for landlords to do capital
work (such as major renovations and repairs) once a
tenant moves out of a unit; and,
b) it results in higher returns to investors in rental housing,
who are then more likely to build new rental properties.
However, it is also argued that vacancy decontrol creates
an incentive for landlords to evict so that they can raise
rents for the unit. As well, tenant advocates believe that
vacancy decontrol has allowed rents to rise too quickly,
resulting in an affordability problem.
The government proposes to eliminate vacancy decontrol
and introduce a system to regulate the rents for new
tenants. At the same time, in order to retain incentives for
investors to build more rental housing, the government
proposes to decontrol regions where high vacancy rates
provide a natural protection against large rent increases
(see chapter on Regional decontrol.)
Questions for consideration:
1. By how much, if at all, should a landlord be able
to increase the rent when a new tenant moves in?
A. No increase. A new tenant should be charged the
same amount as the previous tenant.
This option would address the concern that vacancy
decontrol encourages landlords to evict existing tenants in
order to raise rents. It would also help keep rents on
vacant units affordable. In the short run, this option may
not have a large impact, since in many areas of the
province, rent increases have been low in recent years.
However, this is not the case in all communities.
Further, this option might prove difficult for landlords who
have not been charging the previous tenant full market
rent. Some landlords, particularly small landlords, choose
to charge tenants less than market rent — or at least not
impose guideline increases — to avoid frequent turnovers.
As well, some landlords argue that they wait until a unit
is vacant to do capital repairs, and then charge the new
tenant a higher but fair rent for the improved units (rather
than applying to the Ontario Rental Housing Tribunal (the
Tribunal) for an increase above the provincial guideline). It
would also be necessary to consider how to determine the
rents on units that have been vacant for a period of time.
B. A landlord should be able to charge a new tenant
the same rent as the previous tenant, plus the
increase allowed by the annual rent increase
guideline.
This option would help maintain affordable rent levels for
new tenants, while still allowing landlords to raise rents
modestly. It gives landlords the opportunity to bring the
new rent closer to market level. As well, compared to
option A, this option would create greater incentive for
landlords to maintain and improve rental units. However,
this option might allow landlords to increase the rent for
some units twice in the same year.
C. A landlord should be able to charge a new tenant
the same rent as the previous tenant, plus any
increases that the landlord was allowed to charge
to the previous tenant but chose not to.
4