Rising Rents and Supply in Ontario's Cities

We all expect rent to crawl up bit by bit over the years – between inflation, price hikes, and bills, a modest increase comes as little surprise. But in Ontario, average rents have not just crept up – in recent years they have pulled away from several familiar benchmarks, all at once.

Using Canada Mortgage and Housing Corporation (CMHC) primary rental market data from 1990 to 2025, we compared average rent in Ontario against inflation, median income, and Ontario's rent control guidelines. Beginning in 1990 with average rent at $576, the chart below shows how that amount would have changed if it followed each benchmark.

Rent pulls away from several benchmarks

For much of the earlier period, average rent moved more closely alongside these measures. The gap began to widen in the mid-2010s, with average rent surpassing the rent control benchmark in 2018. By 2025, average rents had risen to roughly three times their 1990 level; inflation, median income, and the rent control benchmark rose by about two times.

The rent control benchmark does not necessarily show what every unit's rent legally should be. Ontario's rent guideline applies unevenly across the rental market – rents can reset when a tenant leaves, newly occupied units built after 2018 are exempt from the guideline, and landlords can apply for above-guideline increases in certain circumstances. In a 2024 report on rent control in Ontario, Ricardo Tranjan and Paulina Vargatoth describe these as major gaps in the system, arguing that the province's rent control framework limits annual increases for many sitting tenants but does not fully regulate the market average.

Using this as a benchmark gives us a way to compare actual rent growth with the pace of increase that Ontario policy has treated as reasonable for many regulated tenancies. A School of Cities report on rent stabilization makes a similar point – rent control is not a complete housing policy on its own, but it can help preserve affordability and reduce displacement when paired with other measures.

Average rents have moved well beyond the guideline, and the pattern holds at finer detail too – across Ontario cities, the increase in average rent from 2018 to 2025 often exceeded what the guideline benchmark would have produced by hundreds of dollars per month.

The excess increase above rent guidelines is widespread across cities

Toronto remains Ontario's largest and most expensive rental market, but the gap is not limited to the GTA. Some of the largest increases appeared in smaller and mid-sized markets, including Guelph, Cambridge, and Newmarket, where average monthly rents rose by $626, $771, and $923 respectively from 2018 to 2025.

This city-level pattern matters because Ontario's rental market is not a single one. Cities differ in vacancy, population growth, student demand, wages, construction activity, and the mix of older regulated buildings and newer market rate units. They also differ in who owns the rental stock, how often units turn over, and how much of the housing system is public, non-profit, co-operative, or fully market rate.

More than meets the (suppl)eye

Discussion of housing affordability often focuses on the need to build more homes – supply and demand. When vacancy rates are low, tenants have fewer alternatives and landlords have more pricing power. The data supports this part of the story – lower vacancy rates are strongly associated with faster rent growth in Ontario, with the same broad pattern appearing in many cities.

But vacancy rates alone do not settle the whole question. Controlling for vacancy rates across the years before and after 2018, rents continued to rise – even as Ontario's primary rental market grew far more quickly than it had in earlier periods. That doesn't mean supply is irrelevant, but rather that the relationship between new supply and rent outcomes is more complex than counting units.

More rental supply does not clearly correspond to slower rent growth

Looking year by year, faster growth in Ontario's primary rental stock did not clearly correspond to slower rent growth. The relationship remained weak and statistically insignificant after adjusting rental stock growth by population. This population-adjusted measure is not a full demand model – it does not account for migration, students, household formation, income changes, or the secondary rental market. But it does test whether the supply pattern changes when new units are scaled to the size of the province – and there is little change.

This is where the kind of supply matters. A School of Cities report on Canada's housing supply mix argues that numeric targets alone are not enough – Canada needs more purpose-built rental, non-market, social, not-for-profit, and co-operative housing, reinstating a legacy of funding social housing, discontinued in the 1990s. The same report notes that adding only market-rate housing can only slowly reduce prices, and not in the near term.

The city-level pattern is also unclear and lacking a strong relationship. Some cities added primary rental units and still saw large rent increases, while others saw modest changes in rental stock while rents still jumped.

Across cities, supply growth does not tell one simple story

One possible explanation is that new rental construction is often concentrated in places where demand is already strong and rent pressure is already high. In those markets, new units may be necessary, but not sufficient, to bring rents back in line with incomes, inflation, or the rent guideline.

Ownership and financing also shapes how rent pressure is translated into rents. A School of Cities report on financialization describes a long shift in which housing is increasingly treated as an investment asset, rather than only as a place to live. Financial landlords play an increasingly large role in Canada's purpose-built rental sector, with the top 25 consolidating about one-fifth of private purpose-built apartment stock in recent years, with recent research by Martine August and Cloé St-Hilaire showing corporate landlords charge higher rents.

The CMHC data used does not identify whether a building is owned by a small landlord, a large corporate landlord, a non-profit, or otherwise. It also does not identify turnover, above-guideline increases, financing costs, or whether new units are public, non-profit, rent-regulated, or fully market rate.

Those omissions are part of the point – unit counts alone do not capture the full rental system. A rent-regulated apartment occupied by a long-term tenant is different from a vacant unit reset to market rent. A new market rate apartment is different from a non-profit, co-operative, or public rental home. And a building managed for long-term affordability may not operate under the same pressures as one managed primarily as a financial asset.

Ontario's rent increases are more than a story of supply and demand. Supply and vacancy matter. But so do the kind of housing being built, who owns it, what rents are charged, and what protections apply once it enters the market.