Several types of rent structures coexist in Ontario, even within the same building. Market rent, affordable rent, and subsidized rent are the most commonly used terms for the various rent structures used across the province, and each is calculated with a different process. Adding to this confusion is the fact that these terms can have different definitions depending on the location. The below will look at the most commonly applied definitions and applications of market, affordable, and subsidized rent.

Market Rent

Market rent is the standard rent amount for a given unit type (bachelor, 1-bedroom, etc.) in a particular area. In Canada, market rent is largely determined by the Canada Mortgage and Housing Corporation (CMHC), which annually publishes the Average Market Rent (AMR) for each Census Metropolitan Area (CMA). This measure is used as a general guideline for landlords to set annual rent rates, in conjunction with the annual Rent Increase Guideline (RIG) set by the province. When a new market tenant moves in, the landlord will set their rent at or near the AMR for the area, and the RIG is used to guide annual rent increases moving forward.

Market rent is the most common rent structure applied in Ontario. Most often it is seen in private rental buildings, but is also used for a minority of units in social housing buildings to offset the lower amounts paid by subsidized rent tenants. With roughly 30% of Ontarians currently renting their homes, market rent is paid by a significant portion of residents, and the AMR can vary drastically between municipalities. For instance, as of October 2021 the average rent for a 2-bedroom apartment in Toronto was $1,570 while in South Dundas in eastern Ontario the average rent for the same unit type was just $633.

Affordable Rent

The term “affordable” in the context of housing can be rather nebulous. As a general topic, affordable housing or affordable rent can be used interchangeably to refer to the basic need for rent amounts which are not so high as to preclude a household from paying for other necessities.

Federally, the standard CMHC definition of affordable housing is housing that costs 30% or less of a household’s monthly income. However, provincially, the CMHC defines affordable housing in Ontario as the lower of either 30% of the household’s monthly income, or a rate that is the same or lower than the area’s average market rent. Municipally, affordable rent in Ontario is most often defined as units that are at or less than the local market rent. More specific definitions can apply in certain municipalities, such as in Toronto, where affordable rent is defined as 80% of the local market rent for a particular unit size (bachelor, 1-bedroom, etc.).

Clearly, the concept of affordable rent amounts is not consistently applied, with the definition changing between levels of government, and across municipalities. Affordable rent is a common topic in Ontario politics due to the housing crisis, and the varying definitions of this term can be problematic, as different stakeholders may have different understandings of the issue.

Subsidized Rent

Subsidized housing can likewise be a confusing term, as subsidization can take several forms. In general though, across Ontario subsidized housing rents are calculated as 30% of a household’s monthly income through the Rent Geared to Income (RGI) process, but this may vary with certain housing providers.

The RGI process recently underwent major changes in 2020. Whereas a household’s rent amount had previously been calculated annually using their current monthly income (based on pay stubs, benefits receipts, etc.), household rent is now calculated using the annual income from the previous tax year (based on an individual’s notice of assessment). This will allow for a more predictable monthly rent amount; with the older system, rent would be recalculated whenever a household’s monthly income changed, whereas with the new system the monthly rent amount will remain consistent month to month based on the previous year’s income.

Resources:

• Maytree: How is Rent-Geared-to-Income in Ontario changing in 2020? What housing and income security advocates need to know
• City of Toronto: Current City of Toronto Average Market Rents & Utility Allowances
• Government of Ontario: Residential Rent Increases
• CMHC: 2022 Rental Market Report