Toronto Rent Increase 2026: Should You Raise Rent?

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%, 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, those two questions lead to very different decisions.

This article walks through the current market conditions, the regulatory rules, 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 guideline, and what it actually means 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.

One distinction that matters significantly: 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, which we will come to shortly.

On a $2,000 per month unit, the 2026 guideline increase is $42 per month — or $504 per year. On $1,500 per month, it is $31.50 per month. These numbers seem straightforward. But whether it is worth pushing for that increase 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?

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

Urbanation reports that average time to lease in the GTHA is currently three to five weeks — and longer for freehold rentals. That is three to five weeks of zero income, before a single repair or listing fee.

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 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.

Tenant moved in before 2018. They are almost certainly well below market — potentially by hundreds of dollars per month. They likely benefited from the 2021 COVID rent freeze. Compounded guideline increases over seven or more years have not kept up with the appreciation that occurred between 2019 and 2023, when rent growth hit 9.1% in a single year. You have a legitimate financial case to explore all options, including an above-guideline increase application if eligible. But weigh that against your realistic re-rent value in today’s softening market before deciding.

Tenant moved in between 2018 and 2022. The gap could go either way. Run the vacancy math for your specific unit and submarket. Check current comparable listings before touching the renewal form.

Tenant moved in between 2022 and the present. They likely signed at or near peak pricing. A 2.1% guideline increase adds marginal revenue but carries real vacancy risk in a market where rents have been falling for more than a year. In most cases: do not push the increase. If they are a solid tenant, renewing without an increase — or with a token gesture — is the smarter financial move.

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. 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 guideline exists. It is your legal right to apply it. 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 in 2026, the answer is no. And the data supports that conclusion more clearly than it has in years.