Tougher Rules for Above-Guideline Rent Hikes

Summary#

• This bill changes how above-guideline rent increases (AGIs) work in Ontario. It aims to stop landlords from using AGIs for cosmetic upgrades or routine work, and to protect tenants who would face hardship from big increases.

• It adds proof and reporting requirements for landlords, limits what costs can be passed on, and requires rent to drop back down on a set date with advance notice.

• Key changes:

  • Landlords must file an engineering or professional report and show the work is necessary for safety, structure, or a vital service—not cosmetic or routine.
  • AGIs cannot be based on luxury upgrades, cosmetic work, routine maintenance, or work needed because the landlord failed to maintain the building.
  • The Board must consider tenant hardship (rent-to-income, local vacancy, and rent pressures) and may reject an AGI that would cause undue hardship.
  • Costs from deals with related parties (non-arm’s length) and costs covered by government grants or rebates cannot be included.
  • When an AGI for capital work ends, rent must be reduced on a Board-set date. Landlords must give tenants 30 days’ notice, or pay 1.5 times any overpayment.

What it means for you#

• Tenants

  • Fewer AGIs for things like lobby makeovers or routine repairs. AGIs should be limited to necessary health, safety, structural, or vital service work.
  • The Board can deny an AGI if it would cause undue hardship, based on your income, local vacancy, and how hard it would be to find another home.
  • More transparency: landlords must show reports and evidence explaining why the work is needed and why replacement (not repair) is reasonable.
  • If the Board approves a time-limited AGI for capital work, your rent must drop on the set date. You must get at least 30 days’ notice of that drop. If you overpay because you weren’t told, you get back 1.5 times the overpaid amount.
  • Work caused by a landlord’s failure to keep the place in good repair cannot be used to raise your rent above the guideline.

• Landlords

  • More documents are required with AGI applications tied to capital work, including an engineering/professional report and proof the work is not cosmetic or routine.
  • You must justify replacing assets instead of repairing them and show the costs come from an arm’s-length deal (between independent parties, not related).
  • You cannot include costs covered by government grants, rebates, or subsidies, or from non-arm’s-length transactions.
  • If you are in breach of maintenance obligations, the Board can dismiss or pause your AGI application.
  • You must give tenants 30 days’ notice of the date their rent will be reduced after an approved capital AGI ends, or pay 1.5 times any overpayment.
  • Applications filed before the law takes effect continue under the old rules.

• Landlord and Tenant Board

  • Must weigh tenant hardship factors in AGI cases and can deny raises that would cause undue hardship.
  • Must exclude ineligible costs and set the date when capital AGI increases come off the rent.

• Timing

  • Takes effect four months after it receives Royal Assent.

Expenses#

Estimated government cost: No publicly available information.

• The bill likely increases paperwork for landlords and review work for the Landlord and Tenant Board.
• Landlords may face penalties (1.5 times overpayment) if they fail to give the required rent-reduction notice.

Proponents' View#

• Protects renters by stopping AGIs for cosmetic or luxury upgrades and routine maintenance.
• Targets AGIs to real needs like safety, structural issues, and vital services, backed by professional reports.
• Helps prevent tenant displacement by letting the Board reject increases that would cause undue hardship.
• Closes loopholes by excluding self-dealing costs and amounts already covered by government assistance.
• Increases transparency and accountability, including clear rent-reduction dates and penalties for failing to notify tenants.

Opponents' View#

• Added paperwork, reports, and uncertainty could slow or discourage needed building improvements.
• The hardship test may lead to inconsistent decisions and make costs less predictable for housing providers.
• Limits on passing through costs (including related-party and grant-funded costs) could make financing capital projects harder.
• The 1.5-times overpayment penalty may be heavy for small landlords who make notice mistakes.
• Extra steps could increase Board workloads and contribute to longer case timelines.