12 months or more to increase rent seems counter-productive. As it would mean that what makes most sense for landlord is to just increase by maximum each and every time as they cannot forecast changes over such long period.
Still, capping increases to something like inflation+2%, and making leases continuous with long termination periods would be entirely sensible fixes.
If inflation+2% is an acceptable rent change, I don't understand how needing 12 months or more to increase rent is a problem. The only thing a shorter time period allows is a landlord to say "well, over this past 3 months we saw inflation change by +-0% but 0+2 is still 2%, so we're increase rent 2% in the next 3 months period".
12 months seems rather extreme range to me. So what would happen is that you rent a place, day after you move in you get notice that yes we are going to increase rent by maximum in a year. After all this is the most logical and effective time to do it. Now cost might not increase as much in year from that date, but landlord does not know. Come next year, they again also don't know, so again max allowed at time.
But instead, if you can notice rent increase let's say 1 month before year is full, they might look at what are current cost and think oh, I could do with lower increase.
> Every 12 months, tenants will receive a notice of pending rent increase, and that rent increase will be the maximum allowed by law.
I'd suggest having no maximum increase, and having the landlord be liable for moving costs if the tenant chooses to move and the landlord is not able to re-rent the unit within a short time period at the increased rent price.
I think the parent's point is that since price increases are capped, landlords cannot increase beyond a certain point in a single bumper year. To compensate, they may increase rents beyond what they would otherwise to be able to maintain a similar average increase. Citation is needed, of course.
In theory, there is some law that should prevent rent increases too much but you would not get anything like that anymore now. Now you get fixed term contracts and after that rent will increase by whatever amount is possible. The time you describe is over (and only valid for old but still existing contracts)
Landlords who choose to increase rents at the maximum rate permitted each year do so at the risk that they will be undercut by competing property owners who do not do so. Given this, I think that your property management company is offering you bad advice.
Most landlords already increase rents at the maximum rate that the market will bear. Capping annual increases at 7% just ensures that in a year when the market would allow landlords to get away with increasing rents by over 7%, they won't be able to do so.
I do not follow when you say that the strategy of increasing rents by the maximum amount permissible is necessary "because larger adjustments cannot be made if and when necessary due to market conditions". In what scenario would larger adjustments be necessary? If you made a viable investment in a property and are currently renting it out, wouldn't rent increases just need to equal inflation in order for you to maintain the same level of profitability? Sure, increasing by more than inflation allows you to increase profits, but I hardly see why maximizing profits should be seen as a necessity---especially when it comes at the cost of pushing people out onto the streets.
This is a weird argument. Would this still happen if rent increases were capped at 10%/year, what about 50%/year? At some point no one is going to rent at the rates you're asking and you're going to have to stop.
Was the tenant happy when you increased it? Increasing rent 12% in one go effectively kicks out most tenants. A smaller annual increase will give them time to adjust to market conditions and choose over a longer period whether or not to move and to save up to do so.
You are doing no one any favors except short-term renters who never get an increase. In other words, your so-called benefit is actually a detriment to long-term renters.
Landlords prefer to give concessions (1-2 months free of rent) rather than lowering the base price. This effectively allows them to increase rent in 12 months by 10+% without issues of rent control legislation.
As a landlord, if you want to forecast over long periods you don't raise rent. Everything else is rolling the dice. Someone who increases rent by the maximum each time owns multiple units they can afford to leave vacant for indeterminate periods, and is gambling with their money.
You can still do it that way. But instead of raising the rent 12% in one year, you can just raise it by 7% one year and then by 4% the next year.
The tenant still gets below market rent for 4 years, you and can defer pricing work for as long as you want without penalty or risking a move out during a busy year.
I think you might be overly worried for your situation. Your 12% example is an amortized difference of at most 1.5% compared to the new 7% cap (1.12yroot3 vs 1.07yroot5).
If rent increases are capped at 7% per year, landlords will have an incentive to increase it at the max, because that gives them more flexibility the next year.
For example, let's say the free market would raise rents 5% this year, and 8% next year. A cap of 7% means the rent will rise 7% this year, as the landlord won't want to have caps permanently reduce future rents.
You‘re comparing apples to oranges. Or in that case existing to new leases.
The latter has way more room for increase than the former - by law. Add to that, that owners often stop bothering increasing rents for longterm tenants (because the allowed increase is the more miniscule the more years pass by) and concentrate on hikes for new leases.
Right, but if you're not in a rent controlled unit my expectation is that the landlord can adjust the rent as high as they'd like at the end of each 6-12 month lease.
> Right, but if you're not in a rent controlled unit my expectation is that the landlord can adjust the rent as high as they'd like at the end of each 6-12 month lease.
Depends on the lease terms; the current place I live we had an un-the-lease $50/mo. limit on increases for the first two annual renewals. Also been in month-to-month leases where in principal the rent could increase at any time without limit for m with 30 days notice.
Rent is far above its CPI-inflated average right now, so saying that rent increases must match inflation makes no sense. The time to do that would've been long ago. But in any case I'm pretty sure rent increases are capped at much higher than inflation.
It's beyond me why people would think this is worse for the tenant. Can I move to CA and be your tenant? You're basically giving your tenants free money.
Let's say the rent is $1000/month (for simplicity). That's $12000/yr in the first year. If you increase the rent by 12% ever 4 years they'll have 3 years of paying $1000/month, followed by a 4th year of $1120/month and so on.
If you instead raised it yearly by 2.87%, which give-or-take is the same as a 12% one-off increase we can calculate the net rent paid over the period in the two scenarios:
The result is that by deferring rental increases you've given your tenant a benefit of $2106, and we can safely assume the rent is a lot higher than $1000/month. I.e. every month of the rent not keeping with market increases is more money for the piggy bank.
Still, capping increases to something like inflation+2%, and making leases continuous with long termination periods would be entirely sensible fixes.
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