Toronto tenants are being told to pay more or get out as mortgage rates rise

Eight months ago, Enrique Solórzano was living in an East York basement unit, paying $1,700 a month including utilities. Then he got a call from his landlord. 

“She told me her mortgage was going up, and she has a realtor friend who told her she could be charging $2,300 for the basement,” he said. She asked Solórzano to pay $500 more a month. 

“I understood that everything was going up, but my expenses were going up too,” he said. Uncomfortable with conflict and, at the time, unaware of his rights as a tenant, Solórzano made the decision to just move out. 

Now he’s living further east from the city and paying hundreds more a month, including utilities. “That was the only place I could find in my budget, and I looked everywhere in the city,” he said. 

The rental market in Toronto, already precarious at best, is the latest casualty of interest rate hikes in the country. There have been 10 rate hikes since March 2022 in Canada, and mortgage holders have seen their payments close to double over time. When those mortgage holders are landlords, they often look to offload those costs on their tenants.

“We’re constantly getting calls from landlords asking how they can raise their rents higher,” Varun Sriskanda, a member on the board of Small Ownership Landlords of Ontario, said. “And their only option is to ask the tenants to move out so they can sell the property.” 

They do this because very few Toronto buyers are willing to buy a property and assume the existing tenant. If the tenant refuses, landlords must attempt  to evict the tenant by serving an N12 — a notice to end the tenancy due to the landlord, a member of the landlord’s family or a purchaser moving in. 

Of course, landlords are trying other methods too: serving an N12, for example — a notice to end the tenancy due to the landlord, a member of the landlord’s family moving in or a purchaser — has become more common. Some of those occur in “bad faith,” where landlords say they’ll move in only to relist the property for much higher rent once the tenant is gone. Rent can only be raised on a yearly basis at a provincially-set percentage, usually under 3 per cent, but in between tenants, rents can be raised as high as a landlord chooses. And thanks to the Ford government’s policy, any building built after Nov. 15, 2018 is not regulated by rent control — allowing landlords to raise rents by $7,000 monthly, such as what happened to two tenants in Toronto, if they choose.

Regardless of what method a landlord chooses, the result is the same — an evicted tenant. And as interest rates have risen, that means more tenants are looking for a new place to rent in Toronto — and potentially fewer landlords renting them. 

“Interest rate hikes have put a lot of financial pressure on me as a landlord, and I’ve actually considered selling the place,” Ryan, a landlord in the GTA, said. “Sometimes you wonder if it’s worth it.” 

He bought the place two years ago, and rented out the basement to a tenant for some supplemental income. But since the rate hikes, Ryan says his mortgage payments have increased by more than $1,000. 

At first, he considered asking his tenant to pay more. “When they increased my mortgage, the first thing you consider is how you can get more money from your source of income,” he said, eventually deciding against it.

If Ryan does end up selling his place, that will be two new renters — he and his tenant — looking for a home among rental supply that is already straining under the demand, and will only worsen with time. And it’s not an equal market once you get there.

“I know landlords who have sold their primary residence, sold their investment property because they can’t hold on to either, and they’re entering the rental market full of cash and willing to pay one year’s rent upfront,” Sriskanda said. “How can the average tenant compare to that?”

Sriskanda said the longer high interest rates persist, the further the rental housing stock will go down. 

“Small landlords, we provide a large chunk of housing in Ontario. If our members start selling off their rental properties, you’ll see a major decline in rental supply,” Sriskanda said. 

But Karen Andrews, a Toronto lawyer with the Advocacy Centre for Tenants Ontario, said having landlords act as the major suppliers of rental units in the province is part of the problem — and puts tenants in more precarious positions.

“I’m starting to see more illegal asks for rent, simply because landlords invest in real estate without understanding what the margins are,” she said. “And they don’t account for the fact that these houses are appreciating, interest rates or not. Why should they expect a tenant to underwrite their wealth acquisition?” 

There is at least something everyone can agree on — Ontario needs more affordable housing. 

“If we had an adequate supply of housing, it wouldn’t matter if the interest rates were sky high — tenants wouldn’t care, they’d just go and find another place,” Sriskanda said. 

Andrews agrees. “If we were to build more social housing, these pressures wouldn’t exist,” she said. “Landlords could do whatever the hell they wanted if renters had choice.”

Solórzano moved to Toronto from Mexico City to study at George Brown College, believing there would be more opportunities for him here. But five years later, Solórzano is considering moving out of the province. “I don’t know how people keep paying this kind of rent,” he said. “It’s about quality of life. If I could live in an area I like, pay less and be closer to things, why wouldn’t I?”

Article exclusive to STREETS OF TORONTO