If you are an Ontario landlord or tenant, you have probably gotten used to the number 2.5%. For the last three years (2023, 2024, and 2025), that was the maximum amount a landlord could raise the rent.
It became such a standard figure that many people started calling it the "2.5% Rule." But for 2026, that rule has been broken.
Here is what you need to know about the 2026 Rent Increase Guideline, why it changed, and who is actually exempt from it.
The New Number for 2026: 2.1%
The Ontario government has officially set the 2026 Rent Increase Guideline at 2.1%.
This applies to rent increases taking effect between January 1, 2026, and December 31, 2026.
Why the drop? The guideline is based on the Ontario Consumer Price Index (CPI), a measure of inflation calculated by Statistics Canada.
Under the Residential Tenancies Act, the guideline is capped at a maximum of 2.5%, regardless of how high inflation gets.
However, because inflation has cooled, the calculated formula for 2026 resulted in 2.1%, coming in under the legislative cap for the first time in years.
Does This Apply to Everyone? (The "2018 Loophole")
No. This is the most critical misunderstanding in Ontario rental law. The 2.1% guideline does not apply to newer units.
If a rental unit was first occupied for residential purposes after November 15, 2018, it is exempt from rent control.
For these units: The landlord can raise the rent by any amount they choose, provided they wait 12 months since the last increase.
For older units (Pre-Nov 2018): The landlord is strictly limited to the 2.1% guideline.
How to Calculate the Increase
If you are rent-controlled, here is the math for 2026:
Current Rent: $2,000.00
2026 Guideline: 2.1%
Maximum Increase: $42.00
New Rent: $2,042.00
3 Rules Landlords Must Follow
Even if the increase is within the 2.1% guideline, you cannot just text your tenant the new price. You must follow the strict procedure:
Wait 12 Months: You can only increase rent once every 12 months (either from the move-in date or the last increase).
Give 90 Days' Notice: You must provide written notice at least 90 days before the increase takes effect.
Use the Right Form: You must use the official Form N1 (Notice of Rent Increase) available from the Landlord and Tenant Board (LTB).
Note: If your unit is exempt from rent control (post-2018), you should use Form N2 instead.
Can Rent Go Higher Than 2.1%?
Yes, but only in specific situations. A landlord can apply to the LTB for an Above Guideline Increase (AGI). This is typically approved only if:
There have been extraordinary increases in municipal taxes and charges.
The landlord has done significant capital work (renovations/repairs).
The landlord has incurred costs for security services.
Summary: The "2.5% Rule" is out. For 2026, the magic number is 2.1%—unless you live in a new building, in which case the sky is the limit.
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