These days, it’s not unusual for tenants in Ontario to face rent increases that add hundreds of dollars to their monthly housing costs. Although cyclic affordability challenges are often to blame — landlords are dealing with roaring overhead, including surging mortgage payments — you could argue that it’s also the result of the province’s complicated relationship with rent control.

For some context, rental apartments, condos, and basement units first occupied after November 15, 2018, aren’t subject to rent controls in Ontario, and there is no limit to how much those housing providers can raise rents. As such, housing advocates have pushed for a more thoughtful rent control system in Ontario.

Last summer, a report prepared by Abigail Bond, Executive Director of the Housing Secretariat for the City of Toronto, made a case for eliminating vacancy decontrol as a way to “prevent the financializing of housing which has been noted as a key driver of evictions.” In that same report, she also suggested that a better way to go about rent control is to tie rent caps to units rather than occupancy.

Although Bond’s recommendations were welcomed by housing advocates — even housing staff at the time indicated they were in support of her proposed rule changes — they have remained just that, recommendations. But if you look to Prince Edward Island, some of the tenant-friendly policy levers suggested by Bond have been in effect for upwards of 30 years. Still, PEI is an example of how nuanced rent control rules, in reality, tend to be.

PEI's Renter Protections Date Back Decades

A spokesperson for PEI's Department of Housing, Land and Communities notes that legislation that ties rent control to the unit and not the tenant has been in effect since 1992. The benefits, the Ministry spokesperson adds, extend to “cost surety for tenants in a time of high inflation and low vacancy rates in some areas of the Island.”

More recently, in the fall of 2022, the Government of PEI passed a new Residential Tenancy Act, which was enacted this past April.

Under the new act, there's now a 3% cap on annual allowable rent increases after December 31, 2023, a 3% cap on additional greater-than-allowable rent increases filed as of April 8, 2023, and compensation for tenants asked to move for renovations, demolitions, and the landlord’s use of the property.

The new legislation also maintains that, for 2023, the maximum allowable increase is 0%, which is based on separate legislation tabled by Matthew MacKay, Minister of Social Development and Housing, in November 2022.

The new act improves upon the previous legislation, known as the Rental of Residential Property Act, which was written close to 30 years ago, and recognizes the need to “better define the protections and responsibilities of both tenants and landlords based on changes to the rental market in PEI over the past five to seven years,” says the Ministry spokesperson.

Mary Jane Webster, Broker-Owner with RE/MAX Charlottetown, says that there’s “comfort” in the new rules for PEI’s share of renters, particularly for those who are renting out of necessity.

“A lot of people are on a fixed income, especially those that are aging out of work and into retirement,” she says. “As there's pressure based on their financial position because of inflation, the one security they have is that their rent is not going to increase astronomically at the same rate of inflation.”

New Legislation "Incredibly Unfair," Say Local Landlords

At the same time, Webster, who is part of a family business that operates a number of rental units in the province, is well-acquainted with the "landlord perspective." From that vantage point, she says the new rules hamper landlords’ ability to reinvest in their properties.

“Most landlords are seeing it as an incredibly unfair piece of legislation. To me, it feels like a really big hammer to hit a really small nail,” she says. “Now, are all landlords perfect and keep their buildings in great repair and all of that? Probably not, but the same goes for tenants. Not every tenant is someone who's going to be caring and respectful of your property, but the new legislation certainly is very heavy-handed on tenant rights.”

And while landlords in PEI do have the option to apply for a greater-than-allowable rent increase through the Residential Tenancy Office — and a spokesperson with the Island Regulatory and Appeals Commission tells STOREYS that approximately 182 applications have been received since the new act was passed — Webster says an additional 3% is little more than a bandaid when you consider that property taxes in PEI have increased by 5% (the maximum allowed under provincial legislation) for the second straight year.

“Most people that have properties are in the business because they see the need for housing and want to take good care of what they have. The legislation then becomes almost prohibitive in terms of your ability to do that,” she says. “Everyone's costs are going up and just because you're a landlord doesn't mean that you're exempt from those costs going up. I think the challenge is why would anyone want to come to our province to have rental properties when the legislation is probably the most restrictive across the nation?”

Webster’s reservations are not unfounded. In fact, if you look at what happened in Ontario just a few years ago, you could argue she’s pretty on the nose.

For a brief period between 2017 and 2018, rent control was extended to all private residential units in Ontario under the Rental Fairness Act — a move that barred rental providers from increasing rental rates past a provincially mandated rent cap.

While this was a positive development for renters in the province, there was unintended fallout. Without the promise of uncapped rental revenue, over 1,000 proposed purpose-built rental units were converted into condominiums. That led the Ford government to rescind the sweeping rent control rules in November 2018 (in turn, removing rent controls for newly occupied units) in an effort to re-incentivize developers and motivate them to invest in Ontario’s rental segment.

Although PEI has some of the most renter-friendly policies in the country, it’s hard to gauge at this stage whether they’re onto something or the rental market will suffer as landlords grapple with rising operational costs and legislation that prevents them from recouping those costs.

The Ministry representative says that with the new act only being a few months in effect, it’s impossible to speak to efficacy or to start addressing grievances. That will come with time.

“Because the act is much larger than the act it replaces and there are new measures in place, it is important that we ensure both tenants and landlords understand the rules in plain language. We are working with our community partners to develop useful guides for both tenants and landlords.”