Rent growth assumptions in a buy vs rent comparison

Why a fixed payment meets a moving rent

During a mortgage term the principal-and-interest payment stays the same. Rent, by contrast, can be reset every year or whenever you move. Over a decade that difference adds up quickly.

On the base case used throughout this page, rent starts at $2,300 a month and grows 3% a year. By year 10 the annual rent bill is $36,012 (about $3,001 a month) instead of the $27,600 paid in year 1. Meanwhile the mortgage payment is $2,657 a month for the whole of the first five-year term.

The rest of the base case is a $600,000 home with 20% down at 4.5%, a 25-year amortization, 3.5% yearly appreciation, a 5.5% return on the renter's investments, 2% inflation and a 10-year stay in Alberta. These are illustrative planning inputs, not current market figures.

Results across rent growth rates

The table changes only the yearly rent increase. Higher growth means the renter's housing cost rises faster, so the renter has less left to invest and the buyer's fixed payment looks better.

The final column states the gap in today's dollars, using the 2% inflation assumption.

Break-even rent and break-even growth

You can turn the question around. Rather than assuming a rent growth rate, ask how much rent today makes buying and renting finish level. With 3% growth, the break-even starting rent for a 10-year stay is about $2,067 a month. If you actually pay more than that for a comparable home, buying comes out ahead on these inputs; if you pay less, renting does.

That break-even rent depends on the growth rate. At 0% growth it is about $2,339, and at 6% growth about $1,821. Faster rent growth makes it easier for buying to compete.

You can also solve for growth. Holding the $2,300 rent fixed, the buy and rent paths finish level at roughly 0.4% yearly rent growth. Any growth above that favours the buyer on the base case, and the margin widens as growth rises. The rent equivalent tool and the rent growth tool run the same test on your own figures.

What rent growth really means

Rent growth in a comparison is the combined effect of three things, and it helps to separate them:

• Regulated increases on an existing tenancy, where the province caps or limits them.
• Market resets that happen when you move, or in places where no cap applies.
• Your own changes in housing, such as moving to a larger place when the household grows.

Provincial rules shape the realistic range

Rent rules differ by province, and they change. For 2026, Ontario's guideline is 2.1% for units first occupied before November 15, 2018, with newer units exempt from the guideline; landlords must give 90 days' written notice and cannot increase rent more than once in 12 months. British Columbia's 2026 maximum annual increase has been reported as 2.3% with three months' notice, but sources conflicted, so check the current figure.

Alberta has no rent-control cap, although increases still need proper written notice. Check your provincial tenancy board for the period that applies.

A cap limits increases while you stay in the same unit. It does not set the rent of your next unit, and some units are not covered at all. If you expect to move, your effective rent growth is closer to the market than to the cap. See rent control by province for the details.

Choosing a range you can defend

Nobody knows next decade's rent path, so use a range and let the result tell you how much the answer depends on it. A cautious low case near zero is useful, because it shows what happens if the landlord side of the market stays quiet. A middle case close to the general inflation target makes sense for a first look. A higher case shows how much cushion buying gains if rents run ahead.

Pair rent growth with the other assumptions so the story hangs together. If you assume rents rise faster, ask whether you are also implying faster home price growth, a higher cost of borrowing or higher inflation. The pairing logic is covered in scenario analysis and inflation and buy vs rent.

Finally, remember that the renter's side includes optional upside. A renter who invests the difference benefits when growth is low and loses ground when it is high, which is the mirror image of the table above. Read it alongside rent and invest the difference.