AT A GLANCE

• The City of Waterloo's Comprehensive Residential Rental Licensing By-law, By-law 2025-044, took effect July 1, 2026 and replaced the city's original 2011 licensing bylaw [1].
• Class A and Class B licences now allow up to five bedrooms [1], one more than the four-bedroom limit Waterloo has used since licensing began in 2012 [6].
• Bedrooms can make up no more than 50% of a unit's gross floor area. Units already over that line keep their layout only if the owner applied within three months of July 1, 2026, which puts the deadline at roughly October 1, 2026 [1].
• Only buildings of three or more storeys with five or more units and an interior corridor are exempt from licensing. Fourplexes and two-storey walk-ups need a licence for every unit [1][2].
• Class D is now a legacy-only licence for units that held Class D or Class Z on July 1, 2026. It cannot be renewed once it lapses [1].
• A licence is void the moment a property sells, including a share sale or a change of corporate control [1].
• All licences issued under the previous bylaw expire no later than December 31, 2026 [1].
• A companion renoviction bylaw requires a City licence within seven days of serving an N13, plus tenant compensation [4].

Note:  The sources, with hyperlinks, are cited with [x] and can be found at the bottom of this post.  Further, many of the graphs are interactive so you can use them to answer questions about your own property.

INTRODUCTION

Waterloo has one of the most closely regulated low-rise rental markets in Ontario, and as of July 1, 2026 it has a new rulebook. Council approved By-law 2025-044 on June 23, 2025 after a multi-year review, and it now governs every licensed rental unit in the city [1][6].

Some of the changes are good news for owners. More bedrooms are allowed, and there is less paperwork for investors who do not live in their rentals. Others quietly change what a building is worth: a new floor area test, a much narrower apartment exemption, and a rule that kills the licence at closing. If you own, are buying, or are selling a rental in Waterloo, this is what you need to know.

Start with the calendar.

THE DEADLINE THAT MATTERS RIGHT NOW

The new bylaw limits bedrooms to no more than 50% of a Class A, Class B or Class S unit's gross floor area [1]. Many student-oriented houses near the University of Waterloo and Wilfrid Laurier were built or converted to maximize bedroom count, and a good number of them will not pass.

There is a legacy exemption. If a unit already exceeded 50% when the bylaw came into force, and it complies with all other laws, it can keep that layout. The owner must apply for the licence, include a formal exemption application and pay the fee within three months of the bylaw coming into force [1]. That lands on or about October 1, 2026. Confirm the exact cutoff with the City's Municipal Enforcement Services; this is not a date to estimate.

Once granted, the exemption is fragile. It ends immediately if the licence expires or if the bedroom share of floor area increases, and the section that creates it expires after January 1, 2027 [1].

Run your own numbers below. Gross floor area is measured to the inside of exterior walls and excludes garages, porches, verandas, sunrooms and stairwells. Basement space counts only where there is at least two metres of clear height [1].

Investor takeaway: when you look at a five-bedroom rental in Waterloo, "is it licensed?" is no longer enough. Ask whether it passes the 50% test on its own, whether an exemption was filed if it does not, and whether that exemption survives your purchase.

THE NEW RULES AT A GLANCE

The five-bedroom cap is a genuine opportunity. A Class A licence now covers up to five bedrooms, and a Class B licence covers up to five tenant-occupied bedrooms [1]. The City describes Class A as its most common licence, covering detached and semi-detached homes, duplexes, triplexes, townhouses, and secondary and basement units where the owner does not live on site [2].

The fifth bedroom only pays if the unit also clears the floor area test and the minimum room sizes. Once three people share a bedroom, the room must be at least 14 square metres. With four or more adults, it is 7 square metres per adult [1].

DO YOU NEED A LICENCE?

No one may operate a residential rental business in Waterloo without a licence, and the bylaw now makes it an offence simply to advertise an unlicensed rental unit or short-term rental [1].

For multi-family investors, the key definition is "Apartment Building," because units in an apartment building do not need a long-term rental licence. To qualify, a building must have three or more storeys and five or more dwelling units, with every unit opening onto an interior common corridor that has a shared entrance at grade. Maisonette buildings and stacked townhouse buildings are excluded at any height [1]. The City's own summary is simple: long-term rental licences apply to low-rise buildings under three storeys [2].

In practice, a two-storey fourplex, or even a two-storey sixplex, needs a licence for every unit. A three-storey, five-unit walk-up with a proper interior corridor does not, unless one of its units is used as a short-term rental [1].

Use the tool below to screen your property.

THE FIVE LICENCE CLASSES

Class A (standard rental). The owner does not live in the unit. Maximum five bedrooms, bedrooms no more than 50% of gross floor area, and no room can be used as a bedroom unless it appears as one on the licence application. Short-term rental is not permitted [1].

Class B (owner-occupied). An owner holding at least 33% of title lives in the unit, with up to five tenant bedrooms. Every short-term rental in a low-rise building falls under Class B, and no guest can stay more than 30 consecutive days [1]. The bylaw is clear that a short-term rental must be owner-occupied [1].

Class C (lodging house). Five or more bedrooms operated as a lodging house. The Fire Code and Building Code rules for boarding, lodging and rooming houses apply. Requirements include no more than two bathrooms and one kitchen, at least five bedrooms, lockable bedroom doors, one tenant per lease, no plumbing in bedrooms, and a building no larger than 600 square metres and no taller than three storeys [1].

Class D (legacy). Only units that held a valid Class D or Class Z licence on July 1, 2026 qualify, and they were granted Class D automatically. Bedrooms are capped at the number previously approved. A Class D licence cannot be renewed if it expires or the use changes, and once it has been expired for more than six months it is gone for good [1]. The City notes that Class D consolidates the former D1, D2 and Z categories [2].

Class S (short-term rental in an apartment building). An owner-occupied unit in an apartment building used as a short-term rental. The application requires a letter from the building owner, property manager or condo board approving the use [1].

WHAT IT COSTS

Fees are charged per licensed unit and scale with bedroom count [2][3].

On a triplex with three 3-bedroom Class A units, that is $1,707 to license and $1,071 a year to renew, before inspections and insurance. Not a deal-breaker, but it belongs in your operating statement and in any buyer's underwriting.

THE PAPERWORK

The document requirements are more practical than many owners expect [1][2][3]:

• Criminal record checks are required only for owners who live in the rental unit, which in practice means Class B applicants. For a corporation, that covers directors, officers and any shareholder holding more than 50% who lives in the unit [1][2].
• Electrical inspections by a licensed electrician must be dated within 12 months, and are required at application and every fifth renewal [1][3].
• Gas or oil appliance inspections by a licensed gas fitter, or a declaration that there are no such appliances, are required at application and every other renewal [2][3].
• Insurance must be at least $2,000,000 per occurrence, and the policy must name the City as an additional insured with a cross-liability endorsement [1]. The City accepts an Insurance Declaration form and does not require a separate certificate at renewal [3].
• Corporate owners must list every director, officer and shareholder holding more than 30% of the shares [1].

There are also obligations toward tenants. Every licensee must give tenants a copy of the licence, and must give them the City's Tenant and Landlord Rights and Obligations Information Package at the start of the tenancy and again before terminating a tenancy or filing any application with the Landlord and Tenant Board [1]. Build that step into every N4, N12 and N13 so it is never missed.

RENEWALS AND THE DECEMBER 31 DEADLINE

Licences renew annually [1]. After a first renewal on March 31, renewal dates follow the street name: A to D on March 31, E to M on August 31, and N to Z on November 30. The first renewal fee is prorated to line up with the assigned date [3].

Every licence issued under the previous bylaw is treated as a licence under By-law 2025-044, but expires on the earlier of the date printed on it or December 31, 2026 [1]. Check the date on every licence you hold.

The City can refuse or decline to renew a licence where the property is not zoning-compliant, has outstanding Property Standards, Building Code, Fire Code or public health orders, or where the owner owes the City money, including property taxes [1].

THE VALUATION ISSUE: THE LICENCE DIES AT CLOSING

This is the provision I spend the most time on with buyers and sellers. Under section 2.2, when a rental unit is sold, including a sale of shares in the corporation that owns it or any change of corporate control, the licence is void immediately. Licences also cannot be transferred or assigned [1].

For a clean Class A duplex, that is an administrative step. The buyer applies, pays the new-application fee and carries on. For a property that relies on a legacy position, it can be much more:

1. A bedroom-heavy house that kept its layout through the 50% exemption. The exemption is tied to the licence and ends if that licence expires [1]. Whether a buyer's new application can carry it forward, particularly after the exemption section itself expires on January 1, 2027, is a question to put to the City in writing before conditions are waived.
2. A building holding a Class D licence. Class D is limited to units that held a valid D or Z licence on July 1, 2026, and it is designed not to survive a lapse [1]. How the City treats a new owner's application should be confirmed before closing, not after.

If either answer is unfavourable, the income being underwritten may lose a bedroom or more. For a seller, getting ahead of these questions protects the price. For a buyer, they belong in the conditions of the agreement and in the offer price.

RENOVICTIONS NOW NEED A LICENCE TOO

Waterloo also passed the Rental Housing Renovation Licence By-law, By-law 2026-012, which took effect the same day [4]. Council approved the program in January, alongside a new Tenant Support Liaison role for tenants facing eviction or landlord disputes [5].

The key rules [4]:

• Apply for a renovation licence within seven calendar days of serving an N13, with one licence per unit.
• Deliver the City's rights package together with the N13.
• Hold a building permit and a report from a qualified person, such as an architect or engineer, confirming vacant possession is required.
• Post a notice of application, and later the licence, on the unit door.
• If the tenant exercises their right of first refusal to return, either pay them the difference between their rent and CMHC's average market rent for a comparable unit for every month of the work, or arrange temporary housing they agree to.
• Pay a one-time $1,000 moving amount per unit, split among the tenants.

All of this is in addition to what the Residential Tenancies Act already requires [4]. Here is how it adds up.

THE COST OF GETTING IT WRONG

Every contravention is a continuing offence. An individual faces a fine of $350 to $25,000 for a first offence and up to $50,000 for a subsequent one. A corporation faces up to $50,000 and $100,000. On top of that, each day an offence continues can draw $350 to $10,000, and daily fines are not capped at $100,000 [1]. The renovation bylaw carries the same fine structure [4].

The most serious power sits in sections 14.5 and 14.6. If an owner is convicted of knowingly operating without a licence, or of another contravention the owner knew or ought to have known about, a court can order the premises closed to any use for up to two years [1]. That is 24 months of carrying costs with no rent coming in.

Many contraventions, including operating or advertising without a licence and failing to deliver the tenant package, can also be enforced through administrative penalties rather than court [1]. If the City has to complete work an owner was ordered to do, it can recover the cost with 15% interest and register it as a lien on title [1].

MARKET CONTEXT: WHY THIS MATTERS MORE IN 2026

The new rules arrive in a softer rental market. CMHC's Fall 2025 report put Kitchener-Cambridge-Waterloo purpose-built vacancy at 4.1%, with an average two-bedroom rent of $1,832 [7]. CMHC noted that the federal cap on international study permits eased demand in student-heavy areas, and that vacancy rose in the Waterloo zone around the University of Waterloo and Wilfrid Laurier University [7].

The softness is concentrated at the upper end. In 2025, vacancy in the most affordable quarter of units was 0.6%, while the two highest-priced tiers sat at 8.0% and 6.0% [8].

That upper tier is where many licensed student houses compete. When units take longer to fill, losing a bedroom to the 50% rule, a lapsed Class D licence, or a licence that dies at closing costs more than it would have in a tighter market.

WHAT TO DO THIS MONTH

1. Confirm the licence class for each Waterloo unit under the new definitions.
2. Measure bedrooms against gross floor area. If a unit is over 50%, contact Municipal Enforcement Services immediately about the exemption window.
3. Record the expiry date on every licence issued before July 1, 2026, with December 31, 2026 as the outside date.
4. If you hold a Class D licence, never let it lapse, and value it as a wasting asset.
5. Send the additional insured and cross-liability wording to your insurance broker.
6. Add the City's rights package to your lease-up, notice and LTB procedures.
7. If a sale is on the horizon, address licence extinguishment in the agreement of purchase and sale, not after closing.

Disclaimer: This post is for informational purposes only and does not constitute legal advice. Consult the City of Waterloo Comprehensive Residential Rental Licensing By-law 2025-044, the Rental Housing Renovation Licence By-law 2026-012 and Zoning By-law 2018-050 for official regulations, and speak with the City's Municipal Enforcement Services about your specific property.

USEFUL LINKS AND RESOURCES

City of Waterloo, Rental Housing Licensing Bylaw (2025-044): https://www.waterloo.ca/bylaws-and-enforcement/bylaw-directory/rental-housing-licensing-bylaw/

City of Waterloo, Residential rental licences (apply, renew, short-term, renovation licence): https://www.waterloo.ca/building-and-renovating/residential-rental-licences/

City of Waterloo, Rental Housing Renovation Licence Bylaw (2026-012): https://www.waterloo.ca/bylaws-and-enforcement/bylaw-directory/rental-housing-renovation-licence-bylaw/

Rental licensing questions: 519-747-8785 or [email protected]. Bylaw questions: [email protected]

Terry Riddoch

If you would like to talk through how any of this applies to a building you own or one you are considering, I am always happy to walk through the numbers.

Terry Riddoch
Real Estate Broker -- Multifamily and Investment Properties, Ontario

Phone: 519 591 1725
Email: [email protected]
Web:www.terryriddoch.ca

SOURCES

1. City of Waterloo. Comprehensive Residential Rental Licensing Bylaw, By-law No. 2025-044 (consolidated digital version), in force July 1, 2026. https://www.waterloo.ca/bylaws-and-enforcement/bylaw-directory/rental-housing-licensing-bylaw/
2. City of Waterloo. Get a long-term rental licence (licence classes, required documents, 2026 fee table). https://www.waterloo.ca/building-and-renovating/residential-rental-licences/get-a-long-term-rental-licence/
3. City of Waterloo. Renew your rental licence (renewal schedule, renewal documents, renewal fees). https://www.waterloo.ca/building-and-renovating/residential-rental-licences/renew-your-rental-licence/
4. City of Waterloo. Rental Housing Renovation Licence Bylaw, By-law No. 2026-012, passed February 23, 2026, in force July 1, 2026. https://www.waterloo.ca/bylaws-and-enforcement/bylaw-directory/rental-housing-renovation-licence-bylaw/
5. City of Waterloo. City of Waterloo council summary January 19, 2026. https://www.waterloo.ca/news/posts/city-of-waterloo-council-summary-january-19-2026/
6. Ontario Human Rights Commission. Report on Inquiry into Rental Housing Licensing in the City of Waterloo, Section 3: Background. https://www.ohrc.on.ca/en/report-inquiry-rental-housing-licensing-city-waterloo/3-background
7. Canada Mortgage and Housing Corporation. Rental Market Report, Canada and Selected Markets, Fall 2025 (Kitchener-Cambridge-Waterloo section). https://www.cmhc-schl.gc.ca/professionals/housing-markets-data-and-research/market-reports/rental-market-reports-major-centres
8. Canada Mortgage and Housing Corporation. Housing Market Information Portal: Kitchener-Cambridge-Waterloo, Historical Vacancy Rates by Rent Quartile, 2012 to 2025. https://www03.cmhc-schl.gc.ca/hmip-pimh/en/TableMapChart/TableMatchingCriteria?GeographyType=MetropolitanMajorArea&GeographyId=0850&CategoryLevel1=Primary+Rental+Market&CategoryLevel2=Vacancy+Rate+%28%25%29&ColumnField=RENTQUARTILE&RowField=TIMESERIES