Yes you claim the rental income. But of course you can also claim costs to offset it. Now you know the differential rent you pay the landlord, so use that.
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/126/menu-eng.html
http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-e.html
http://www.cra-arc.gc.ca/E/pub/tp/it434rsr/it434rsr-e.html
http://www.cra-arc.gc.ca/E/pub/tp/it434r/it434r-e.html
Allowable business expenses are listed here:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/menu-eng.html
http://www.cra-arc.gc.ca/tx/ndvdls/tpcs/ncm-tx/rtrn/cmpltng/rprtng-ncm/lns101-170/126/menu-eng.html
http://www.cra-arc.gc.ca/E/pub/tg/t4036/t4036-e.html
http://www.cra-arc.gc.ca/E/pub/tp/it434rsr/it434rsr-e.html
http://www.cra-arc.gc.ca/E/pub/tp/it434r/it434r-e.html
Allowable business expenses are listed here:
http://www.cra-arc.gc.ca/tx/bsnss/tpcs/slprtnr/bsnssxpnss/menu-eng.html