Ontario's 2027 rent cap is 1.9%. Ottawa's market cap is lower

The number landed in June and almost nobody in Ottawa reacted

Ontario's rent increase guideline for 2027 is 1.9%. Down from 2.1% in 2026, and from 2.5% in each of the three years before that. It is the lowest guideline since 2022.

I have heard the complaint from two Ottawa landlords this month and both times it was aimed at the wrong target. The guideline is not what is capping your rent right now. The Ottawa rental market is, and it is capping it harder than Queen's Park is.

What the guideline actually does

Ontario calculates it off the provincial Consumer Price Index using June-to-May data, then caps the result at 2.5%. It applies to most private rental units under the Residential Tenancies Act, including rented houses, condos and basement apartments. You need 12 months since the last increase or since the tenancy began, and at least 90 days written notice on the LTB's N1 form.

Here is the part worth acting on. The guideline that applies is the one in force on the date the increase takes effect, not the date you serve notice. If your anniversary lands in October, November or December of this year, you are still on the 2026 number of 2.1%. Let it drift into January and you are on 1.9%. On a $2,000 unit that is four dollars a month, which sounds like nothing until you remember every future increase compounds off that base. For a January 1 increase the earliest you can serve the N1 is October 3. I counted it. Exactly 90 days.

The three things the guideline never touched

Turnover. When a tenancy ends and a new tenant signs, you and that tenant agree on the rent. No guideline, no cap, no LTB. This is where Ontario's actual rent growth has always happened.

Units first occupied after November 15, 2018. New buildings, additions, and most new basement apartments are exempt from rent control entirely.

Above-guideline increases. You can apply to the Landlord and Tenant Board for more, usually for capital expenditures or extraordinary tax increases.

So a lot of Ottawa investors holding newer stock were never guideline-limited to begin with. Which brings me to the uncomfortable part.

The exemption you paid a premium for is worth the least right now

CMHC's 2025 Rental Market Report has the number that should reset how Ottawa investors think about this. Ottawa's purpose-built vacancy rate rose to 3.0%, up from 2.6% in 2024 and 2.1% in 2023. A slow softening, nothing dramatic.

Now split it. Newly built units in Ottawa ran a 6.7% vacancy rate, more than double the city average. Units above $2,400 a month sat around 7%. Units under $1,100 sat at 0.8%.

Read that with your investor hat on. The rent-controlled 1970s walk-up at $1,050 has vacancy under one percent. The rent-control-exempt 2023 build at $2,500 is near seven. In Ottawa today, exemption from the guideline is inversely correlated with pricing power. You can raise the rent as much as you like on a unit nobody is competing for.

That is not a knock on new construction. It is a correction to the idea that the exemption is the asset.

Ottawa asking rents already fell further than the guideline gap

CMHC's 2026 mid-year update puts Ottawa in the same group as Toronto, Vancouver and Calgary, with asking rents declining since the second quarter of 2025. Their 2-bedroom asking rent index for Ottawa peaked at 108.7 in Q1 2025 and sat at 104.4 by Q4. Call it a 4% drop off the top.

The market took 4% off your asking rent while you were arguing about 20 basis points of guideline.

The supply story behind it is not subtle. CMHC counted close to 5,000 new rental units added in Ottawa in the survey year. Ten to fifteen years ago the city absorbed about 400 annually. Meanwhile Ontario's international net migration went from roughly 300,000 people over January to September 2024 to negative 70,000 across the same months in 2025. More units, fewer arrivals. Sandy Hill, where student demand lives, moved from 2.0% vacancy to 3.3%.

Completions in early 2026 are tracking above last year, and CMHC reports incentives have intensified over the past six months, in some cases reaching several months of free rent. I walked through what this softening does to a small landlord's numbers back in July, and nothing in the guideline announcement argues the other way.

The math nobody runs: keep the tenant or reprice the unit

This is where 1.9% actually gets decided, and it is arithmetic, not policy.

Take a unit at $2,000 with a tenant in place. Ottawa's average two-bedroom is $1,926, so this is a real Ottawa number.

Serve the N1 at 1.9% and you are at $2,038 a month. That is $24,456 over the year with zero vacancy and zero turnover cost.

Now let the tenant go and reprice. Say you get $2,100, a 5% lift. One month to fill, and call turnover costs $1,500 for paint, cleaning, photos and listing time. Eleven months at $2,100 is $23,100, less $1,500, so $21,600. You are down $2,856 against simply keeping the tenant, and you spend two or three years earning it back.

Run it backwards and you get the number that matters. To beat the in-place tenant with one month of vacancy and $1,500 in costs, you need $2,360 in market rent. That is 18% above what the unit rents for today. In a market where asking rents are down 4% and new units are taking months to fill, an 18% turnover lift is not a plan.

The tenant who quietly accepts 1.9% is worth more than most Ottawa landlords currently think.

What I would do between now and October

Serve the notice. It is the one increase you get and you cannot backdate it. Diarize the anniversary and count back 90 days.

Prove the exemption if you claim one. Ontario puts the burden on the landlord. Building permits, occupancy permit, warranty documents, contractor invoices, before-and-after photos on a basement conversion. Section 15 of the standard lease is where you disclose it. If you cannot prove it, you do not have it.

Use an incentive instead of a rent cut on a vacancy. A month of free rent costs the same cash as roughly an 8% annual rent reduction, but it does not permanently reset your rent roll, and the rent roll is what an appraiser and a buyer capitalize. CMHC's economists point to this as exactly why operators are choosing incentives over cuts.

Reprice off current asks, not last year's lease. The unit that leased at $2,250 in early 2025 is not a $2,250 unit today.

The honest read

Vacancy at 3.0% sits right inside the 2.0% to 4.0% band CMHC estimates as balanced for Ottawa. This is not a collapse, and rents paid by sitting tenants are still rising. What ended is the stretch where you could push rent without thinking about who was going to pay it, and where the rent-control exemption felt like a licence rather than a line item.

If you are weighing a new secondary suite, the exemption still helps, but run the basement secondary suite math on today's rents rather than 2023's. And if you have a unit sitting empty, read the vacant unit tax post before you decide to wait the market out, because in Ottawa an empty unit is not a free option.

Own Ottawa rental property and want a straight answer on whether to push the increase, hold the tenant, or sell the thing? Call me at 613-262-6545 or email fil@613realtor.ca. I will run your actual unit instead of a market average. If you want to see what is trading first, have a look at current listings.