(UPDATE – Check this link for details about the Annual Guideline Increase for 2013: http://wp.me/pia0J-TX)
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The announcement by the Ontario Government of a 3.1% rent increase in 2012 is cause for concern among most tenants, especially those tenants surviving on modest incomes. Landlords can increase rents by 3.1% without making an application to the Landlord and Tenant Board in 2012.
Refer to this link: http://www.ltb.gov.on.ca/stdprodconsume/groups/csc/@ltb/@keyinfo/documents/resourcelist/stdprod_088485.pdf
The explanation for this dramatic increase in the annual rent increase guideline has been attributed to the increase in the Consumer Price Index (CPI). Rick Bartolucci, Minister for Municipal Affairs and Housing, has acknowledged that this sharp increase in annual rental costs is related to the increased cost of certain consumer products used in the formula by Statistics Canada to calculate the CPI. Refer to this link: http://ottawa.ctv.ca/servlet/an/local/CTVNews/20110729/OTT_Rent_110729/20110729?hub=OttawaHome
Most of us are very aware that the cost of certain consumer products have been rising, especially gas prices. And gas happens to be one of the consumer products included in the calculation of the CPI. As a result of this unexpectedly high rent increase Mr. Bartolucci is also promising that, if re-elected, the Liberals would change the way Ontario’s rent increases rate were set. That is certainly an acknowledgement that there are serious shortcomings with the method currently used to calculate annual rent increases. It is puzzling that there has not yet been a response from either Tim Hudak (Conservative Leader) or Andrea Horwath (NDP Leader) to the announcement of this unusually high rent increase.
Many media reports indicate that landlord representatives are also welcoming the idea that a new method of calculating annual rent increases should be considered. Tenants would also welcome such an idea so long as there is a fair and balanced approach to calculating annual rent increases.
According to the article mentioned above The Federation of Rental-Housing Providers of Ontario (FRPO) are also not enthused with this rent increase rate and even suggest it should be closer to 7% . They claim this current increase does not cover the cost increases incurred by rental housing providers. Yet many tenants have ongoing issues with inadequate maintenance and repairs in their apartment buildings. The fact that HST is not passed on to tenants is still a big irritant for many housing providers, hence their push for an even higher annual rent increase.
Considering that most rental housing providers and developers receive significant tax breaks and incentives from all levels of government to construct rental housing the FRPO response to the annual rent increase guideline is baffling. Needless to say, with the annual rent increase set at 3.1% for 2012 we tenants are resigned to the fact that the Above Guideline Increase will be sky-high for 2012.
We look forward to hearing from you about the 2012 annual rent increase guideline and also your thoughts on how annual rent increases could be better calculated.
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NOTES
1) The Landlord and Tenant Board has a brief summary of how the annual rent increase is calculated in Ontario. See this link: http://www.ltb.gov.on.ca/en/Key_Information/STDPROD_067677.html
2) Interest Payment On Last Month Rent– It is also recommended that you check our link Renting Regulations regarding interest payment on your Last Month Rent (LMR). Based on the regulations of the Residential Tenancies Act, the landlord is required to pay you annual interest on your last month’s rent deposit. According to the Residential Tenancies Act …. the landlord must pay the tenant interest on the rent deposit every 12 months. The amount of interest that a landlord must pay is the same as the rent increase guideline that is in effect when the interest payment is due.
All I know is my salary has been frozen for most of the last 10 years. A 3.1% increase is unheard of these days.
The FRPO is misleading in its statement about capital improvements: landlords can apply to the Landlord and Tenant Board for rent increases based on capital expenditures, and do not need to rely on the normal rent increases for such projects. The FRPO line about such limited rent increase (the official 3.1% vs. the 7.0 that FRPO wants) leading to decreased quality of rental experience is pure hogwash.
I agree the FRPO comment is nonsense. Very important point you raised about capital expenditures and landlords going to the Landlord & Tenants board to apply for rent increases above the guideline. Landlords have legal means to recoup their expenses so what FRPO is saying is rubbish.
I note that the allowable increase for 2011 was 0.7%, this in the year the HST hit all heating and electrical costs and maintenance costs. So for the balance of the two years a total of 3.8% or 1.9% per year–seems pretty reasonable.
The only thing Hudak will do about this huge rent increase for 2012 is keep silent and ignore it. Landlords, developpers & the elites are his main supporters, not ordinary struggling folk. With an election about 3 months away you can’t expect him to upset any of them. No word from Hudak is not surprising but would like to know what Andrea Horwath has to say about this rent increase and also the whacky method currently used to calculate the annual rent increases.
The first question to pose is what was the rationale for linking the annual rent increase to the CPI in the first place? And the second question could be is what are the ramifications of linking the annual rent increases to the cost of the landlord’s maintnance and repairs of their rental building? If the latter is the case then common sense should dictate that the annual rent increase rate should be directly related to the ‘specific costs’ that landlords incur to manage and maintain their rental buildings! But …might not this lead us into a more murky area since many of these ‘specific costs’ of landlords are impacted by the CPI and the HST! How do we know if the landlords costs are legitimate anyway? And how do we factor in ongoing tax breaks for landlords related to environmental projects?
Rents will continue to increase considerably especially if there is a housing bubble as predicted for 2012. It is small consolation that the Ontario government is seeking a better way to calculate annual rent inrceases. Will they need a new department and the usual army of inept government employees to figure out a better way to calculate rent increase and waste more taxpayers money in the process? Am not optimistic politcians can find a better way to calculate annual rent increases that will satisfy both landlords and tenants. More governmetn waste. The stock market is not a good place to invest in these days so landlords have to squeeze as much as they can from tenants in higher rents while not doing proper maintenance and repairs .
Aren’t there any creative economists out there to come up with a formula that links the rate of inflation with wages, housing costs and “legitimate costs” incurred by housing providers that would satisfy everyone?
Very interesting situation seems to be developing here … if the housing bubble bursts next year (and the economy does not improve) and more people have to depend on rental housing rather than being homeowners and there isn’t an adequate supply of affordable housing then …….Hmmmm! We will see the not too nice effects of supply and demand in action – high demand for apartments but an insufficient supply. So lots of over-crowding!
What on earth does FRPO mean by claiming this very high increase does not cover the landlord’s costs and that is should be higher? At all levels of government these landlords are given all kinds of financial goodies and tax incentives to encourge construction of rental buildings and they still want more! Being ‘fair’ is too much to ask of landlords as that does not figure in their equation when it comes to rental costs.. Why don’t these housing providers opt for investing in the stock market and see how their investment will perform. . ..especially nowadays.
I agree entirely that there should be a more balanced method to calculate annual rent increases. These horrible landlords who ignore repairs and maintenance should invest their money in the stock market. No tax breaks or incentives or bailout for them! We need more decent landlords !