Toronto Rent Increase 2026: Should You Raise Rent?

Estimated reading time: 13 minutes

If you are asking “Should I raise rent in Toronto right now?”, you are not alone. Your tenant is coming up for renewal, the 2026 guideline sits at 2.1% (dropping to 1.9% in 2027), and the market has shifted more than most landlords realize.

Here is a data-driven framework to make this decision like an investor, not an emotional one.

You have a tenant coming up for renewal. Maybe they have been with you two years. Maybe seven. And you are staring at that lease form thinking: do I raise the rent? How much? And what happens if they leave?

The honest answer is that it depends, but not on what most landlords think it depends on. The gut instinct is to ask how much more you can get. The right question is what it will actually cost you if your tenant walks. In the Toronto rental market of mid-2026, heading into a 2027 guideline that is now confirmed at its lowest level in years, those two questions lead to very different decisions.

This article walks through the current market conditions, the regulatory rules for both 2026 and 2027, the real math of vacancy, and a three-question framework that changes how most landlords approach renewal season.

What Is Actually Happening in the Toronto Rental Market

You cannot make a smart renewal decision without understanding what your tenant would face if they left. And right now, they would find considerably more options than they would have found two or three years ago.

The purpose-built vacancy rate in the Toronto CMA hit 3.0% in CMHC’s 2025 Rental Market Survey, the highest since before the pandemic, up from 2.5% in 2024. Urbanation’s Q1 2025 data puts the City of Toronto figure even higher at 3.7% for newer purpose-built buildings. By Q1 2026, the GTHA vacancy rate in rent-stabilized buildings completed since 2000 reached 5.4%, a five-year high.

TRREB data shows rental listings were up 8.5% year-over-year in Q4 2025, with more supply chasing similar or weaker demand. The average condo rent fell to $2,592 per month in Q4 2025, the lowest in three years. One-bedroom units averaged $2,313, down 4.4% year-over-year. Two-bedrooms averaged $3,017, down 8.3%.

But the headline numbers understate the real shift. When you factor in landlord incentives — free rent months, moving allowances, signing bonuses — effective rents in the City of Toronto dropped 3.8% year-over-year, according to Urbanation’s Q1 2026 data. Two-thirds of new rental buildings are now offering incentives, and 47% are offering two full months of free rent to attract tenants.

Vacancy is your competition. The more options your tenant has, the more leverage they carry at renewal. And right now, they have more leverage than at any point since before the pandemic.

The 2026 and 2027 Guidelines, and What They Actually Mean for Your Unit

Ontario’s rent increase guideline for 2026 is 2.1%, the maximum you can raise rent on a sitting, rent-controlled tenant without LTB approval, down from 2.5% in 2025. You must serve Form N1 at least 90 days in advance of the increase taking effect.

Ontario has now confirmed the guideline for 2027 at 1.9%, effective for increases taking effect on or after January 1, 2027 — the lowest guideline in years, continuing the same downward trend from 2.5% in 2025 to 2.1% in 2026. The figure is calculated from the average Ontario Consumer Price Index over the 12 months from June of the prior year to May of the current year, and it is published on Ontario’s official rent increase guideline page. If you are planning a renewal that lands right around year-end, the timing matters: increases dated in 2026 still use the 2.1% cap, and only increases taking effect on or after January 1, 2027 fall under 1.9%. Because of the 90-day notice requirement, you can serve an N1 for a January 1, 2027 increase as early as October 3, 2026.

One distinction that matters significantly, in both years: if your unit was first occupied after November 15, 2018, it is exempt from rent control under the Ontario Residential Tenancies Act. You can raise rent by any amount with proper notice. This exemption applies to a meaningful share of Toronto’s newer rental stock, and it changes the financial calculus entirely.

On a $2,000 per month unit, the 2026 guideline increase is $42 per month, or $504 per year. Under the 2027 guideline, that same unit would rise by only $38 per month, or about $456 per year. On $1,500 per month, it is $31.50 per month in 2026, dropping to roughly $28.50 per month in 2027. These numbers seem straightforward, and they are getting smaller. But whether it is worth pushing for that increase, in either year, is an entirely different question, and it depends on math most landlords never sit down to do.

The Vacancy Math Most Landlords Skip

For any landlord asking “should I raise rent in Toronto?”, this is the number that changes the answer.

Most landlords approaching renewal ask: how much more can I get? The right question is: what does it actually cost me if this tenant leaves?

Victoria Reid, LandLord’s Leasing Manager, places tenants across Toronto year-round. Here is how she describes what landlords are actually facing right now:

“Given current conditions, it may be prudent to consider a modest reduction, even $25, to retain a good tenant.”
— Victoria Reid, Leasing Manager, LandLord Property & Rental Management

When a tenant turns over in today’s Toronto market, here is what you are realistically looking at:

If you are vacant for six weeks at $2,000 per month, that is $3,000 in lost rent alone, before $300 to $600 in cleaning, $1,000 to $2,000 in painting, minor repairs, and a locator fee of one month’s rent plus HST. And if the re-rent comes in at $100 to $200 below your previous lease rate, which is common in today’s market, that gap compounds every single month going forward. The break-even on a $42 guideline increase stretches well beyond a decade — and it stretches even further under the smaller $38 increase that the 1.9% 2027 guideline would produce on the same unit.

Now consider the other scenario. If your unit is decontrolled, occupied after November 2018, and the market rent is $2,600 but your tenant is paying $2,100, there is a $500 per month gap: $6,000 per year. In that case, the economics of turnover change considerably. Recovering a $6,000 annual premium is worth absorbing a short vacancy. But if you are looking at a guideline increase worth $504 per year in 2026 (or roughly $456 in 2027) and you would need to re-rent at a discount in a market where rents are down 4 to 8%, you will not come out ahead.

The Tenancy Age Factor: The Variable Almost No One Calculates

How long your tenant has been in the unit is possibly the most important variable in the entire renewal decision, and most landlords give it almost no weight.

CMHC’s 2025 Rental Market Survey confirmed a number that should change how you think about long-tenancy units. The average turnover rent for a Toronto one-bedroom was $2,073 per month. The average non-turnover rent, what sitting tenants were actually paying, was just $1,711 per month. That is a $362 gap, a 21% premium that a new tenant would pay for the same unit. For Toronto two-bedroom units in 2024, CMHC measured the gap at 44%, the highest of any major Canadian city.

That gap matters, but it does not automatically mean turnover is worth pursuing. Consider where your tenant falls.

The Real Cost of a Bad Tenant

There is a risk on the other side of this decision that landlords consistently underestimate until they are living through it.

A rent increase causes a good tenant to leave. The unit sits for four weeks. Then a new tenant arrives, someone you do not know yet, whose payment history you cannot verify, whose habits you have not observed across two winters and a summer.

The LTB backlog in Ontario remains severe. An eviction for non-payment can take six to twelve months or longer. A bad tenant — missed payments, property damage, noise complaints, legal disputes — can cost tens of thousands of dollars and more than a year of sustained stress and process.

This is not sentiment. It is risk management. The value of a known, reliable tenant compounds over years in ways that a spreadsheet does not easily capture, but your stress levels, your building’s condition, and your net operating income all feel it.

A Three-Question Framework for Renewal Decisions

This framework exists because the question “should I raise rent in Toronto?” deserves a structured answer, not a gut reaction. So, before you sign that renewal form or serve a notice of increase, answer these three questions in order.

Should You Raise Rent or Is Retention the Smarter Play?

The Toronto rental market in mid-2026 is not 2022. Vacancy is rising. Rents are softening. Tenants have more options than they have had in years. And the 2027 guideline dropping to 1.9% only reinforces the direction of travel: the built-in revenue from simply applying the guideline keeps shrinking, while the cost of a vacancy keeps climbing. As Victoria puts it, if a tenant were to vacate, most units would need to be re-listed below 2022 pricing levels to remain competitive, on top of a locator fee, vacancy loss, and turnover costs.

The landlords performing well right now are not the ones who pushed the maximum allowable increase at every renewal. They are the ones retaining quality tenants, minimizing turnover, and pricing based on current data, not assumptions carried over from the peak years.

The 2026 and 2027 guidelines exist. It is your legal right to apply them. But the question was never whether you can raise rent. The question is whether, in this market, with this tenant, in this unit, it is the smartest financial move you can make.

For most Toronto landlords with reliable sitting tenants heading into 2026 and 2027, the answer is no. And the data, and the people placing tenants on the ground every day, support that conclusion more clearly than they have in years.

Frequently Asked Questions: Raising Rent in Toronto in 2026 and 2027