Experts: What To Do If Your Rent Increases but Your Paycheck Doesn’t
Many renters across the United States are struggling with significant hikes in rent prices. While an annual increase is usually expected at a reasonable rate, all bets are off in the current housing market.
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What can renters do about this? GOBankingRates spoke with Amy Mueller, VP of communications at ApartmentAdvisor, who shares next steps renters can take to prepare for and negotiate a rent hike and considerations to keep in mind before finding a new living situation.
How Much Should a Reasonable Rent Increase Cost?
In a stable market, Mueller said a reasonable annual rent increase would be in the 3% to 6% range.
Rent prices in the current housing market continue to soar rather than soften. The small affordability gains renters made during the early days of the COVID-19 pandemic where landlords discounted rents have ended.
Now, rents continue to push past projections and many increases, in an economic period marked by inflation, seem extreme by comparison. “Demand is back up in many urban markets compared to the early days of the pandemic, and landlords are more confident they can fill their units at these higher prices, whether with existing tenants or new ones,” said Mueller.
How To Prepare for a Rent Increase
If your rent is increasing and you want to stay in your place, Mueller recommends taking the following steps.
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Check Your Lease
The first step renters need to take when faced with a rent hike is to read their lease. Check to make sure the rent increase is legal.
Mueller uses the example of renters that have signed a year-long lease. The landlord cannot raise your rent before the term ends. They must also give renters notice in writing unless otherwise specified.
For tenants that live in a rent-controlled apartment, Mueller said the landlord cannot raise your rent more than what is specified by the local law.
Don’t Panic
“Your landlord must give you required notice about the rent increase, per your lease,” said Mueller.
Do not panic about the situation. If you live alone, live with a partner or have roommates, you may start exploring the pros and cons of staying or whether you should find a new apartment. Renters who live with other people, like roommates, must collectively have this discussion together to align on making their final decision.
Research the Market
One of the best ways to prepare for a rent hike is to research and learn about the current local market values. “Not only will this help you evaluate whether the rent increase is reasonable, it also gives you a better idea of what is available — at what price — if you decide to find another place,” said Mueller.
Reevaluate Your Budget
What percentage of a rent increase can you afford? Mueller recommends doing the math on whether you can afford the increase or simply what you can afford.
Remember: the general rule of thumb is to keep your share of rent to 30% or less of your income. Calculate the increase you may be able to afford using a rent calculator. Renters who live with roommates need to discuss the increase together. Make sure everyone is comfortable with the extra expense. If not, ask if you plan to stay together if you decide to move to a new place.
What If the Rent Increase Isn’t Reasonable?
There are a few measures renters can take if they receive a rent increase that isn’t reasonable or possible for their budgets. Renters may reach out to their landlord and try to negotiate the increase. Some landlords may be willing to make accommodations, especially for good tenants they don’t want to lose.
In other cases, negotiating a rent increase may require more preparation. Mueller recommends asking to meet with your landlord to discuss. Here are a few strategic areas to focus on during a rent increase negotiation.
Do Your Price Homework
Gather your market research and show it to your landlord. Share examples of asking rents on comparable units in your neighborhood if these units are lower than what has been proposed in the rent hike.
Keep Cool
Don’t let any emotions get the best of you during this meeting. Renters should be polite and professional when they communicate with their landlords.
It’s also important to approach the conversation as a discussion, rather than a confrontation. Mueller said renters may acknowledge the landlord’s position, then suggest a price point supported by the renter’s market research data.
Highlight Your Value
What makes you the kind of tenant that a landlord wants to keep rather than lose? Use this discussion to remind your landlord about the value you bring as a renter.
“Landlords like tenants who pay their rent on time, take good care of their apartment and common areas and don’t cause issues with other neighbors in the building,” said Mueller.
Ask For Other Things
The discussion a renter has with their landlord may mean asking for other things. The landlord, or property manager, may have more flexibility to make accommodations in other areas.
Renters who plan to stay in their apartments for a long-term period may inquire about signing a longer lease at a lower rate as part of their negotiation. If you pay additional fees for pet rent or parking, Mueller recommends asking for reductions on these fees.
What If You Love Where You Live, but Don’t Love the Rent Increase?
There are a few options renters may consider. The first surrounds the cost of moving. This factors in physical moving costs, like broker fees, potential commuting or parking expenses and time off from work, and emotional costs associated with a move. If these costs exceed or approach the monthly increase over next year, Mueller said renters may decide it’s not worth moving.
The other aspect to consider is the current, tight housing market. Renters may find that getting a new place that better fits budgets may require moving to a different neighborhood in your city or living in a smaller place with fewer amenities. Mueller said there is a flipside where renters might find something that works even better than your current place, so it’s a good idea to keep an open mind. But, renters will also need to find a place that meets their needs and decide if they are willing to make any necessary compromises.
“If you truly love where you live, it’s probably worth fighting for your place, whether that’s trying to negotiate with your landlord, or making the new budget work,” said Mueller.
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This article originally appeared on GOBankingRates.com: Experts: What To Do If Your Rent Increases but Your Paycheck Doesn’t
