Should You Raise Rent? A Decision Framework for Toronto Landlords

Estimated reading time: 8 minutes

When you're eligible to increase the rent on a Toronto rental property, the obvious question is: how much can I raise it?

The more useful question is: should you raise it at all?

A lawful rent increase can improve rental income. But if the increase contributes to a reliable tenant leaving, the resulting vacancy, turnover costs, leasing expenses, and uncertainty of a new tenancy can easily outweigh the additional rent you were trying to collect.

The decision is therefore not simply about the maximum increase available under Ontario law. It is an investment decision involving tenant retention, current market rent, vacancy risk, and the long-term performance of the property.

Here is a framework Toronto landlords can use whenever a rent increase becomes available.

Start with what you are legally allowed to do

Before deciding whether an increase makes financial sense, determine what increase is legally available for the property.

Ontario publishes a rent increase guideline each year for most rent-controlled residential tenancies. Rather than relying on an older percentage, check the current guideline using LandLord's Ontario Rent Increase Calculator or the Government of Ontario's current rent increase guidance .

In most cases, at least 12 months must have passed since the tenant's last lawful rent increase or since the tenancy began before another increase can take effect.

The landlord must also provide the required written notice at least 90 days before the increase takes effect.

Another important distinction is whether the rental unit is subject to Ontario's annual rent increase guideline.

Under current Ontario law, certain new buildings, additions, and rental units first occupied for residential purposes after November 15, 2018 are exempt from the annual guideline.

That exemption changes how much an owner may lawfully increase the rent, but it does not eliminate the need to think about whether the proposed increase makes financial sense.

Question 1: What is the annual value of the increase?

Landlords often focus on the new monthly rent. For an investment decision, the annual value is more useful.

If a proposed increase adds $40 per month, the additional gross rental income is $480 per year.

If it adds $75 per month, the additional annual income is $900.

Write that number down.

That is the financial upside you are comparing against the risk and cost of tenant turnover.

The relevant number is not simply the percentage increase. It is how many actual dollars the increase adds to the property's annual income.

Question 2: What would it cost if the tenant left?

This is where the calculation becomes more interesting.

A tenant leaving does not only create lost rent. Turnover can produce several expenses at the same time.

A vacancy of only a few weeks can erase a surprisingly large number of monthly rent increases.

Add leasing costs , cleaning, repairs, and preparation, and a small annual increase may take several years to recover the cost of one turnover.

This does not mean landlords should avoid increases simply because a tenant might leave.

It means the potential turnover cost belongs in the same calculation as the additional rent.

Question 3: What would the unit actually rent for today?

The current market matters more than what the property rented for several years ago, what a neighbouring owner is asking, or what an online estimate says the unit should be worth.

Look at genuinely comparable properties:

• Same neighbourhood or immediate submarket.
• Similar property and unit type.
• Comparable size and layout.
• Similar parking, outdoor space, utilities, and amenities.
• Comparable condition and finish quality.
• Recent rental activity rather than old peak-market pricing.

Asking rent is useful, but leased comparables are more valuable where available. A property listed for $2,600 but sitting vacant for six weeks does not necessarily prove that the market rent is $2,600.

The comparison you need is between what your current tenant pays and what another qualified tenant would realistically pay for the property today.

The market-rent gap changes the decision

Consider two different situations.

The tenant is paying close to market rent

If the tenant is already paying roughly what the unit would achieve if listed today, the financial upside of turnover is limited.

A modest increase may add some income, but losing the tenant could result in vacancy and turnover expenses without producing a significantly higher new rent.

In this situation, tenant retention deserves substantial weight.

The tenant is paying substantially below market rent

The calculation changes when there is a meaningful gap between the existing rent and what the property could realistically achieve.

A difference of several hundred dollars per month represents thousands of dollars of annual income.

That does not automatically mean turnover is desirable, particularly for a rent-controlled tenancy where an owner cannot simply terminate the tenancy to obtain market rent.

But the size of the gap is still an important part of evaluating the property's income position and long-term strategy.

A reliable tenant has economic value

Tenant quality is another variable that is difficult to capture in a simple rent comparison.

A reliable tenant has already demonstrated how they behave.

You know whether rent arrives consistently. You know how they communicate. You know how they treat the property. You know how frequently maintenance issues arise and how reasonable they are to work with.

When that tenant leaves, those known variables disappear.

The next tenancy may be equally successful. It may be better. It may also create missed payments, property damage , neighbour complaints, additional maintenance, or a legal dispute.

This does not mean a good tenant should never receive a rent increase.

It means tenant reliability has financial value and should be included in the decision rather than treated as irrelevant.

Market conditions should influence the strategy

Rental markets change.

In a tight market with limited supply and strong demand, an accurately priced unit may lease quickly. In a softer market with more competing inventory, the same turnover can take longer and require more negotiation.

That means the correct rent-increase strategy cannot be determined permanently from one set of Toronto market statistics.

Before making the decision, look at what is happening in the property's actual submarket now:

• How many comparable rentals are currently available?
• How long are comparable properties remaining on the market?
• Are asking rents rising, flat, or falling?
• Are competing landlords offering incentives?
• How difficult is it currently to secure a qualified tenant?

This is why property management strategy and rent strategy are closely connected. The correct decision depends on leasing conditions, property performance, tenant history, and current market evidence — not simply the maximum lawful percentage.

Rent-controlled and guideline-exempt units require different thinking

For a rent-controlled tenancy, the annual guideline limits the increase available in most circumstances.

That often means the additional annual income from an increase is relatively predictable. The question becomes whether the incremental revenue justifies any additional retention risk.

Guideline-exempt units require a different analysis because the annual guideline does not set the same maximum.

But legal flexibility does not mean unlimited market pricing power.

If an increase moves the rent materially above what comparable properties are offering, the tenant can still choose to leave. The owner may then discover that the open market does not support the proposed rent.

For both types of property, market rent remains the anchor.

When a rent increase may make sense

A rent increase may be easier to justify financially when:

• The proposed rent remains competitive with comparable properties.
• The additional annual income is meaningful relative to turnover risk.
• The tenant is paying materially below current market rent.
• Operating expenses have increased and the adjustment supports the property's long-term financial sustainability.
• The property remains attractive enough that a turnover could reasonably be absorbed if the tenant decides to leave.

When retention may be worth more than the increase

Holding the rent or applying a smaller increase may deserve consideration when:

• The tenant is reliable and takes good care of the property.
• The current rent is already close to market.
• Comparable properties are taking longer to lease.
• The annual value of the increase is small relative to likely turnover costs.
• Significant cleaning, painting, or maintenance would be required between tenancies.
• The property would likely have to be re-listed at the same rent or less.

The objective is not to maximize rent in every individual year.

It is to maximize the property's long-term net income while controlling vacancy, maintenance, and tenancy risk.

A simple framework for deciding whether to raise rent

Before serving a rent increase, write down three numbers:

1. Annual value of the increase

How much additional gross rent will the increase actually generate over 12 months?

2. Realistic turnover cost

If the tenant leaves, what would you spend on vacancy, preparation, leasing , repairs, and your own time?

3. Current market-rent gap

What is the difference between the existing rent and what the unit would realistically lease for today?

Once those three numbers are visible, the decision usually becomes much clearer.

The bottom line

The question is not simply whether you are legally allowed to increase the rent.

The question is whether the increase improves the expected financial performance of the property after vacancy risk, turnover costs, market rent, and tenant quality are considered.

Sometimes the maximum lawful increase is the right decision.

Sometimes a smaller increase is more profitable.

And sometimes keeping a proven tenant at the existing rent produces a better return than collecting a little more each month and risking an expensive turnover.

The right answer changes with the property, the tenant, and the market. The framework does not.

Frequently Asked Questions

How often can a landlord increase rent in Ontario?

In most cases, at least 12 months must have passed since the tenant's last lawful rent increase or since the tenancy began before another increase can take effect. The landlord must also provide the required written notice at least 90 days in advance.

How much can a landlord raise rent in Ontario?

For most rent-controlled units, Ontario sets an annual rent increase guideline. Because the percentage changes from year to year, landlords should check the current guideline before calculating an increase. Certain rental units are exempt from the annual guideline.

Are all Toronto rental properties subject to rent control?

No. Under current Ontario law, certain new buildings, additions, and rental units first occupied for residential purposes after November 15, 2018 are exempt from the annual rent increase guideline. Owners should confirm whether their particular unit qualifies before serving a notice.

Should I increase rent every year?

Not necessarily. A landlord should compare the annual value of the increase with the tenant's reliability, current market rent, likely vacancy period, and the full cost of turnover. The maximum lawful increase is not automatically the most profitable decision.

Should I raise rent on a good tenant?

A good tenant has economic value. If the current rent is already close to market and turnover would be expensive, retaining the tenant may be worth more than a relatively small increase. If the existing rent is substantially below market, the calculation may be different.

What if my tenant is already paying more than current market rent?

Increasing the rent further can increase turnover risk, particularly if comparable units are available for less. Before serving an increase, compare the existing rent with current competing properties and consider what the unit would realistically achieve if the tenant left.

What should I calculate before increasing rent?

Calculate the annual dollar value of the proposed increase, your realistic cost if the tenant leaves, and the difference between the current rent and today's achievable market rent. Those three figures provide a stronger basis for the decision than the guideline percentage alone.