Ontario is about to experience more real estate pressures in the form of higher rents. The Government of Ontario released its annual rent guideline for 2023. This guideline covers the maximum increase most tenants can experience in the year. With inflation at a 40-year high, it’s hardly surprising to see the guideline at a decade high. However, rent is also a component of inflation, and the hikes will help entrench the high growth. This will make it even more difficult to bring inflation back to the target range.
Ontario Landlords Allowed To Hike Rents The Most In A Decade
Ontario’s rental guideline is making up for lost time, doubling last year’s maximum. Landlords can hike rents by 2.5% in 2023, following the 1.2% increase in 2022. It’s the highest the guideline has allowed since 2013, a full decade prior.
It might not sound like much, but a person paying $2,000/month would need to shell out an extra $600/year. Not massive, but not exactly a nickel for a paper bag either.
New Supply Is Largely Exempt From Any Rent Controls
The guideline applies to a large share of private dwellings, possibly the majority. This includes rented homes, apartments, basement apartments, and condos. Exclusions exist, including new buildings occupied for the first time after November 2018. These units have no controls, and ditto with the rent a new tenant pays when occupying a new rental. The guideline only applies to existing tenants remaining in place.
Homes excluded from the guideline can see prices increase to infinity. Some units vacated are currently going for double the rent previous tenants paid. Is it finally clear why so many institutions want a part of Canada’s rental game?
A Maximum That’s More Like A Minimum
Understanding the guideline’s maximum impact on costs isn’t as straightforward as many think. Many people assume if those renters see a guideline of 1.2%, that’s how much rent will grow for the market. Statistics Canada’s consumer price index (CPI) shows Ontario’s annual rent growth was 5.6% in May. That’s more than 4x the 2022 guideline, largely due to exemptions.
Landlords are most likely experiencing higher costs, especially for property taxes. However, the above target rate entrenches high inflation further and makes it stickier. This is the exact scenario every bank warned the central bank about, for over a year now.
Stagflation fears are getting real.
Instead of saying inflation is rising prices or rising rents, a more true definition of inflation is increase of the money supply. More currency units chasing the same or less amounts of goods and services.
https://betterdwelling.com/canadas-money-supply-is-growing-at-the-fastest-rate-in-over-30-years/
What our friends in Ottawa have been printing the last 2 year is coming down the pipe, in combination with sitting large parts of the working populating at home and paying them to do nothing (= less goods and services and MORE money supply)
Tax increases aren’t nearly as bad as insurance rate increases. If real estate really has increased in value as noted, then insurers ar reevaluating replacement costs for the properties they are insuraince to account for that. Maybe you were paying premiums to replace a 500k property, but now its a 750k property?
You must not have home insurance, as otherwise you’d know that the difference in those amounts would be $20 worst case … but likely nothing as they largely overshoot and do full replacement
screw face nation
In Canada, the most important categories in the CPI basket are Shelter (27.5 per cent of the total weight) and Transportation (19.3 per cent). Food accounts for 16.1 per cent; Household Operations, Furnishings and Equipment for 11.8 per cent; Recreation, Education and Reading for 11.8 per cent; Clothing and Footwear for 5.7 per cent; Health and Personal Care for 5 per cent; Alcoholic Beverages and Tobacco Products for the remaining 3 per cent. The CPI basket is reviewed every four years on the basis of household surveys. The current weights are based on spending PATTERNS in 2009.
Depending on what part of Canada you live in, the CPI basket will change. Shelter (27.5 per cent of the total weight) suggests you’re captive and held for a ransom. The largest rent hikes in decades work for the landlord but nobody else. You may be able to adjust food, recreation, travel, clothing costs, etc., but thanks to the Ontario Government a windfall goes to landlords.
Doug Ford received a majority of seats in the recent election with 18% of the votes, using the old first-past-the-post election system. He must believe those working in Ontario don’t compete on the Global stage. Yet, 70% of Canada’s manufacturing occurs from Montreal to the US border.
“Landlords are most likely experiencing higher costs, especially for property taxes.” Why do our governments keep throwing gasoline on the dumpster fire..?
In other words this increase is still only about 30% of the official inflation figure. So what’s the issue? Explicit costs of providing housing have been going up every year. Implicit costs driven by landlord unfriendly legal regime have also been going up.
How can anyone afford to live in this day and age with the cost of living keeps going up. Rent, food, transportation etc…
Even with one job it’s still not enough to make ends meet. It’s like you got sacrifice one bill for another. What about the people who have kids to take care of. Canada child tax does not give parents enough to cover cost of living these days.