General Question

girlofscience's avatar

By what percentage should rent increase per year?

Asked by girlofscience (7477 points ) March 12th, 2009

Our lease is up for renewal.

- Our contract ends June 28, as we moved in on that date in 2008.
– The apartment is a beautiful 2-bedroom, 2-bathroom in a nice community in Durham, North Carolina.
– Utilities are not included in the monthly rent.
– Though the complex has many amenities, no new amenities have been added since we have moved in.
– We have had no problems with the apartment nor the management.
– Our apartment is in a complex; it is not a single apartment we have rented from a landlord.

There is a rent increase this year (and all years, I’m sure), and the amount of increase is dependent upon the number of months for which we choose to renew our lease. We can choose anywhere between 3 and 18 months. Renewing for between 10–13 months provides the best immediate deal. However, even though the monthly rate if we renewed for 18 months would be higher, this course of action may be better in the long run because it would be longer before we would be subject to another, even higher rent increase.

In any event, my main question is as it stands:

By what percentage should rent increase per year?

- What is fair to ask of tenants?
– If the increase percentage is higher than this, to what degree can the tenants negotiate?
– Should the amount we are being required to pay as a result of this increase equal or exceed the amount that the apartments are going for with new tenants? For instance, if our apartment was $1500/month, and with renewal, there would be a 5% increase, making our apartment $1575 per month, but the apartments are only going for $1550 for new tenants, is this still fair and acceptable?

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33 Answers

marinelife's avatar

Fair is not part of the equation. The market situation is what matters.

Complexes like that offer move-in incentives. Once people are in, inertia makes them reluctant to move out, which is why they do not offer the same incentives to tenants renewing.

In our market the vacancy rate is very high. There are incredibly good move-in specials everywhere. In that case, I would definitely ask for a break because to keep the unit occupied has a dollar value to the complex.

Besides, what have you got to lose by negotiating?

DrBill's avatar

My tenants rent is attached to the inflation rate. I also give rent control to all tenants. (If rent is paid in full, on or before the due date, every month of the lease, there will be no increase.)

girlofscience's avatar

@Marina: If it makes a difference, there is currently only 1 vacant apartment in the community (out of 240). (And this is not just what they told me; I found this information by searching their website for available apartments, and I also realized that there were almost no vacant apartments when I canvassed for the Obama campaign.) Additionally, most of the neighbors I know have been living here for years. So, there does not seem to be a high vacancy rate, and it appears that it may actually be very difficult for new tenants to find an apartment here. How does that affect the market situation?

@DrBill: We have always paid rent in full on or before the due date, but there is still an increase. :(

marinelife's avatar

It decreases their willingness to negotiate. You can try, though.

girlofscience's avatar

@Marina: But wouldn’t they prefer to keep us rather than offer our apartment to a new person? Given the move-in specials, they would be getting less from a new person, and they would also have to pay a crew to do the repainting and such of our apartment.

marinelife's avatar

It depends. Do they have a waiting list? (No lost revenue.) Are they doing unit upgrades as people vacate?

Probably no way to know until you try.

casheroo's avatar

I was always under the impression that the amount of the increase would be listed in your current lease. Ours was supposed to go up by $100 after the first year. She didn’t bother with it though.
What does your lease say about the increase?

cak's avatar

@GoS – considering they have a very high retention rate, the ball is in their court. Even if they lost you as a tenant, with that high of an occupancy rate, they are still doing very well, especially for an apartment complex.

I’m with Marina – it wouldn’t hurt to approach them, but I wouldn’t expect them to budge. Especially if they are at that high of an occupancy rate.

galileogirl's avatar

You might think like the Dr that the ‘fair’ thing is to tie into cost of living which should be down in 2009 but there are 2 things that might act against $0 increases. If you are in an area where there are a lot of foreclosures, there is likely to be a greater demand for rentals. Even when foreclosures are purchased, especially condos, they will probably be for rentals instead of owner-occupied. The second thing is there should be increased taxes and fees on real property that will cause rents to go up.

Complexes are always going to have higher increases because they tend to kick in automatically and incentives are only to get you in the door (nobody likes to move). If you can get a smaller property owner and you are a good tenant (quiet, clean, financially responsible) they have an incentive to keep you. I live under rent control with a max of < 2%/yr and my landlord sometimes skips a year.

dynamicduo's avatar

I have never heard once of a rent increase dependent on time of living in the apartment, but I suppose it could be a tactic chosen by the landlords.

Here in Ontario our rent increases are mandated by law. They cannot go above 1.8% without being approved by the Tenant and Landlord Board. My rental company is in fact filing for an increase of 2.8% and I am now going through the process of combating this, however it’s essentially impossible – the way it works is that the rental company has already done various work on the building (caulking, etc) which has been paid for in full, and only then can the rental company seek to increase rent to gain back the money. This has an inherit flaw in that I have no knowledge over whether the company got a good or bad deal for caulking a building, or whether they passed on the contract to some friends with a 10% markup, etc.

In my case, the price difference in 1.8 to 2.8% is only $10 a month, which to me is about a half hour of my time. It’s clear that I would have to put in way more effort than a half hour (even extrapolate the saving to 6 hours), and even then the board may rule that my rental company is correct in the increase. So right now I am monitoring the situation, but I doubt I will take any steps to combat it further. They have made the bet that I am not willing to move out to save $10 a month, and they are correct. So I will pay it now, but rest assured I will never forget this experience with my rental company Minto, who already have a low status in my mind because of their shoddy construction work (my parent’s home) and lack of ethics.

Nothing’s fair when it comes to rentals. It’s not personal, it’s business. Sure, it’s a dick move to raise the rent of tenants when one has empty apartments, but they’ll still do it anyway because they want your money (like all companies in existence). It’s just like poker, they’re betting that you are willing to stay at Price+X and it’s up to you to call them out on their bluff by trying to negotiate a lower payment… but they have the trump card of saying “ok, bye” and not renewing your lease (of course, in Ontario tenants become month-to-month at the end of a lease, and a landlord cannot evict a tenant without cause).

The fact that they have only 1 empty apartment shows that the building is in high demand, thus they would likely rather deal with a client who is willing to give in to their demands (in this case, a new one) than to continue to deal with a client who is going to protest and be troublesome in general (yes I know you’re not being troublesome, but to a greedy rental company any customer is troublesome if they don’t just give in to what the company wants). It is not with traditional business in that losing a client costs more than acquiring a new one, because the real estate business is much different than general business.

Basically, they are playing hardball, and they have the negotiating cards here, not you. It doesn’t hurt to ask them to lower the increase (well it may, as explained above) but don’t expect them to budge one bit.

EmpressPixie's avatar

So this is just… as a comment. It’s not an analysis or anything, just letting you know. My sister and her husband just bought their first house. When they gave notice to their landlord—who when they moved in had very fair and area-comparable prices—offered to slash their rent by a third to keep them.

I would look around for comparable apartments and look into what the rent on them is, even with deals. If you feel the landlord raises the rent too much say you’ve found another place that’s basically the same but cheaper and see what happens. The only thing is, you have to be willing to actually go.

At the same time: when I left my building a year ago, they asked why I was leaving and I said basically, “You told me the best I could do here for a 1BR was over $300 more than what the woman down the street in a nicer complex is charging.” And they didn’t offer to drop the rate to keep me.

galileogirl's avatar

@dynamicduo Here in SF the landlord cannot pass on maintenance costs. When they do something really big like bringing up to earthquake code requirements, they have to spread the expense over 20 years. A $40,000 upgrade over 20 years divided by 10 apts would be $200 year increase or $16/mo. The rent control is only on the current tenant so when the apt is vacant the landlord brings it up to market price. Of course rent control leads to a low vacancy rate because once you have a good place, you keep it. My rent has gone up by < 1.5%/year for 18 years while the comp rent has more than tripled.

Of course since 70% of us are renters, renters rule!

cwilbur's avatar

It’s fair for the landlord to ask anything he wants of tenants. It’s also fair for the tenants to say, “Um, no, we’ll move out before we pay that.”

The trick to successful negotiation is always being willing to just walk away. If you really want to negotiate, do some research, find another apartment you’d be willing to move to, figure out how much it’s worth to you to stay instead of moving, and go to the rental office with that information. “We’ve found another apartment that rents for $1400, but we’d rather not move. If you don’t set our rent at $1500, we’re moving out.”

They may not negotiate, and if they get the sense that you won’t actually move out, they certainly won’t negotiate.

Computergenius's avatar

I have this book, Secrets of a millionaire landlord, and the author advises owners to increase the rent every year, not by a percentage, but $50 or $75. He says half of the renters will pay it without blinking, and the other half will complain, so he advises to give the complainers a break and only increase their rent $25 or $37. I really like @cwilbur ‘s advice, you should negotiate from a position of strength, i.e., be willing to really walk away.

Lightlyseared's avatar

Generally it goes up by the rate of inflation.

Judi's avatar

The short answer is “What the market will bear.” Some apartment communities (a lot in your area if I’m not mistaken) use a complicated rent matrix program. It takes into account things like vacancy percentage, historical turnover, market rents and anticipated lease renewals. The goal is to get the highest total income with the least possible expense. That said, everything is negotiable and the cost to turn over an apartment is usually equivalent to at least one months rent. Divide that by 12 and there is a huge incentive to keep you in place, happy, and paying your rent on time every month.
If they are offering new residents a lower rental rate I would try and negotiate down to what they are charging new residents. It would not make business sense to let you go because you were not willing to pay the higher rate. You are a known element. They already know that you pay your rent on time and don’t bother your neighbors. This new person gertting a better deal presents a higher risk.
I would love to hear the outcome! I am in the apartment business on the west coast, but I am always interested in learning what people are doing in other places. Did they offer you an ipod or anything for renewing?

girlofscience's avatar

Ok, so I asked this question when I was at work and I got a call from the manager of my apartment complex. She said, “Hello, girlofscience! I am just calling to let you know that your lease is up for renewal and we would love to have you continue to live here! I will be leaving a note on your door with the prices for renewal.”

I asked her what percentage the increase was, and she said she did not have the letter in front of her at the time, but that it varied, depending on how many months I was going to renew for.

Sooo, I asked this question while at work, in advance of seeing the rates, so I would be armed with more knowledge about what to expect.

Now I’m home and have received the letter.

According to the letter, I can renew for anywhere between 1 and 18 months, and the amount of increase is dependent upon the number of months for which I renew.

For those of you interested, like Judi, the letter says:

Dear GirlOfScience and Mr. GirlOfScience,

You’ve been great residents and we’d like you to continue to call GoS Apartments home after your lease expires on 6/27/2009. So, we’ve made it easier than ever for you to stay with us by giving you flexible lease terms at competitive prices. You decide which lease term and price works best for you – no more one-size-fits-all leases and pricing. Take a look at the options below, then call or stop by the leasing office to discuss the details of your renewal.

1 month: + $329
2 months: + $329
3 months: + $208
4 months: + $142
5 months: + $149
6 months: + $149
7 months: + $149
8 months: + $149
9 months: + $43
10 months: + $22
11 months: + $14
12 months: + $7
13 months: + $7
14 months: + $12
15 months: + $208
16 months: + $142
17 months: + $147
18 months: + $147

If you do decide to move, please provide us with 60-day written notice of intent to vacate. If we don’t hear from you before your lease expires, your lease will convert to month-to-month status effective the first day following expiration. The monthly rate indicated in the one-month option above will apply.

Sincerely,
The GoS Apartments Team

….....

Um, hmm… So initially, when I posted this, I just knew that the best deal was between approximately 10–13 months from what the manager told me on the phone, but I assumed that 18 months might be the best course of action because then, it would be longer until we were again subjected to another increase.

But it seems that is not the case, because for 18 months, that is a ridiculous increase!!

I think we are going to go with renewing for 13 months…

I am just curious about this distribution though… Any insight into why there might be such a gigantic increase for staying longer???

(Oh, and they are the increases per month, not the overall amount I would have to pay to renew for that time period.)

Judi's avatar

They may be counting on an economic recovery and values going up by then. I hope they are right! It also may have to do with how many leases they already have expiring during those months. We try to make sure most of our leases expire during the most active months and we have less than 5% expire during November, December and January because we don’t have any traffic during those months.
No iPod hu?

Zaku's avatar

Rent should increase by negative 5% per year, until everyone has the right to live someplace.

I usually move when landlords try to increase my rent, except when they show a reason for the increase – one landlord I had would document his cost increases to justify rent increases, which was great.

cwilbur's avatar

I suspect that the high prices on the short-term lease renewals are to encourage you to stay longer—because if they renew your lease for 3 months, then you move out, then they have to find someone, they want to get compensated for that. (Reasonably or not, they want to get compensated.)

The longer-term ones are probably high because they expect rental prices to go up in your area over then next 18 months, and they are factoring in what they’d expect to get if you moved out and they set the price of your apartment at market rates.

I’d look at all of those as a starting point for negotiation, not a “take it or leave it” offer. But if you want to renew for a year, a $7/month increase is probably less than the inflation rate, so it might not be worth quibbling.

casheroo's avatar

18 months from June would be December, and since you live near a University..most people move in during the summer (I assume) so that might be why there’s such an increase during that time period. 13 or 14 months look like your best option.

dynamicduo's avatar

Hehe, that’s a neat tactic they’re pulling! It’s really nothing to be worried about here. They’re just trying to coerce you into taking the one year lease. A $7 rental raise per month is a very good deal, much less than the 1.8% all landlords apply each year here. Then again it’s probably because we have mandatory increases that I think it’s a good deal.

Oh, and I’m not convinced at all with this line here: The monthly rate indicated in the one-month option above will apply. The reason I am not convinced is 100% because of the rental laws in my province of Ontario, which state that the rent continues exactly as is on the lease and the landlord cannot arbitrarily change the rental rate. But again this will depend on your place of resident’s laws.

If I were in your situation I would take the 13 month renewal. I agree with @cwilbur‘s idea of using it as the starting point, but consider that if all goes bad, you will have lost your apartment and be forced to move, as well as losing your time, for a grand savings of $85. Is eighty five bucks worth fighting to you? Only you can know this for sure. Personally, this amount is not worth my time.

LindaWallace's avatar

I live in a double apt house with my sister. My daughter lived with us originally but had moved out on her own. We signed a rental agreement 5 years ago for 3 people. I recently got back with my daughter’s father and he moved in, making it 3 people again in the apt Our landlady wants to raise the rent possibly over 100 a nonth because he lives here.
Can she legally do this? Also, we have pets, and we have to pay 20 per month for them. 2 small dogs and one cat. We currently pay 500 per month plus 60 for pets. People have told me she shouldn’t be able to do this, just that she should have just required an additional deposit.

Judi's avatar

yes they can if you are in a month to month tenancy. She has the option to raise the rent and you have the option to move.

LindaWallace's avatar

I understand i can move, which we will be anyways, but is there no rental increase cap on rent in NYS? She’s talking over 10% increase.

Judi's avatar

It depends on the local laws. Here in California, you have to give 30 days notice unless someone has lived someplace over a year you have to give them 60 days notice.
There are also areas that are bound by Rent Control laws which are even more strict about when and how much rent increases can be.
I think rent control creates ghettos because the owners have no incentive to keep the property nice.
I own apartments and I have inexpensive and more expensive apartments. I can tell you, that we are having as hard of a time as anyone keeping our income up. I think more families are merging in these hard times and so the market is still competitive for apartments. If your landlord doesn’t want to treat you like a valued customer, gt out and find someone who will. If you have a good rental history and always paid your rent on time there are plenty of people who are ready to treat you like gold to gt you to live in their communities.

bmn240's avatar

By what percentage can the apartment management increase the rent on a yearly lease in San Jose, CA 95123?

Judi's avatar

@bmn240, Here is the rent control schedule for San Jose you have to put your address in to see if rent control effects your home.

bmn240's avatar

Hi Judi, thanks for your response. But when I click the link you sent, I get here: http://m.youtube.com/index?desktop_uri=%2F&gl=US#/watch?v=Ty91zlSPYXk

bmn240's avatar

Thanks, Judi. I found that link by googling san jose rent control. It says: “Your building is not covered by the City of San Jose’s Rent Ordinance. For more information about the Ordinance, please call (408) 975–4480.”

Does that mean my landlord can increase the rent by 10%? We have been living at this place for 4 years and are a very good tenant in terms of rent payment, civility etc.

bmn240's avatar

I did some more digging around – asking the san jose housing department. they say that the landlord can increase the rent by any % as they are not under rent control, but they have to give 30 or 60 day notice. That answers our question i guess.

Judi's avatar

Yes. If they’re not under rent control they can raise it as much as they want if you have a month to month agreement, but if they raise it by more than 10% in a year they have to give you 60 days notice instead of 30 days.

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