They say the only things certain in life are death and taxes, but a lot of tenants would like to add one more to that list: rent increases.
With the skyrocketing homeownership costs, severe housing shortages, and high demand for quality rentals in good locations, there seems to be no escaping the inevitable. The only question is: What is a reasonable rent increase?
In this article, I am going to answer that question. I will cover what the overall rental market looks like, specific rental laws relating to rent increases (with examples from key state and localities), and some strategies you can use to try to keep rent increases under control.
If you don’t have the time to read through it all, here’s a short answer to the question:
A reasonable rent increase is one that brings rent in line with market conditions. The average nationwide rent increase year over year from 2017 to 2022 was 5.77%. However, housing markets are localized, so you will need to look at prevailing rents in your area to understand where rents stand for units that are comparable to yours.
Ok, let’s get into it.
The information contained in this post is for informational purposes only. It is not legal advice. You should seek the advice of a qualified legal professional before making any decisions relating to the topics covered by this article.
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What Factors Play Into Rent Increases?
A lot of factors can play into rental increases. To understand whether a rent increase is reasonable, we need to evaluate the various factors that dictate rental prices. Let’s start with the most obvious one – rent control laws.
If you live in an area that is governed by rent control or rent stabilization laws, the amount that your landlord can raise your rent is usually going to be capped by those laws. So that is the first thing you need to check.
If you think this applies to you, your applicable laws to understand how high your landlord can raise your rents (if at all). I will give some examples later on how different jurisdictions address this.
If your home is not subject to rent control laws, then the landlord is going to be able to raise rents without legal limitations, although they generally cannot raise rent in the middle of the lease term.
They will also need to be mindful of market conditions when re-setting rents because if they overprice the unit, no one will take them up on it.
I know of plenty of tenants who left a greedy landlord because they were smart enough to do their homework. The overpriced place just sat on the market until the landlord realized his competitors were snatching up all of the tenants while his unit languished.
So what is market? As mentioned at the top of the article, average rental increases have been around 5.77% nationwide from 2017 to 2022, but there was a massive jump in 2022 of over 20%. Source.
I guess inflation started going crazy during that time period and rents followed suit.
How Do I Check Fair Market Value For My Rental?
You can look up the fair market value of your rental unit based on your county on the HUD website.
Alternatively, you can use online rental services to check how much a property in your area can rent for. Rent-o-meter is a popular choice, but I use Zillow and Apartments.com to look at rental properties in my area and see what they are going for. It’s pretty reliable.
Finally, you should read your lease to see if it lays out what your rent increase may be if you choose to renew your lease at the end of the initial term.
I know many landlords that spell this out in their lease because they want to be transparent with their tenants and so there is no debate later on about what the tenant should expect if they choose to renew.
What Is a Reasonable Rent Increase in California?
As I mentioned at the top, I will be reviewing rental increases in some key jurisdictions. Let’s start with the biggest state: California.
In California, landlords can increase the rent within a 12-month period by 5% plus the percentage change in the CPI or 10%, whichever is lower.
However, the actual amount you can increase the rent depends largely on local regulations, which can vary as much as state laws can.
Occasionally, a city’s rent stabilization law conflicts with the state’s rent control policies. In this case, city law often overrides state policies if it provides more substantial tenant protection.
If you want more detail on how this all works, check out my article on the topic here. I go through each of the variables in involved in calculating maximum rental increases and give sample calculations.
What Is a Reasonable Rent Increase in New York City?
In New York, the rent increase for a property depends on whether it’s rent-controlled or rent-stabilized. If the unit isn’t subject to either, the landlord can bump the rent by any amount, following local rules.
Rent controlled apartments in NYC have a 3.25% cap on rent increases for one-year leases and a 5% cap for two-year leases. If your place is not rent controlled, there is no cap, but there are advance notice requirements if the landlord increases the rent by 5% or more.
To learn more about rental price limitations in NYC, check out my full article on the topic here.
What Is a Reasonable Rent Increase in Texas?
Texas doesn’t have rent control programs. It also prohibits cities from establishing local rent control ordinances unless there’s a state of disaster declaration and housing emergency.
Upon lease renewal, landlords can jack up the rent on a whim, provided it’s not retaliatory or discriminatory.
Texas law doesn’t require a specific notice period for the increase but expects both parties to act in good faith.
As you can see, rental laws are all over the board and they can be pretty complex. You will definitely need to study them in some detail if you want a definitive answer on what laws govern your area. Or you can always hire a lawyer to help you navigate all this.
For your convenience, here’s our 50 state reference table (including D.C.) that will link you to the official landlord tenant laws of your state.
If you prefer to have a lawyer assist you, I would try JustAnswer. They boast access to thousands of highly-rated, verified real estate lawyers whom you can connect with via their unlimited chat service.
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What Can I Do to Keep Rental Increases Reasonable?
Your best weapons are (i) understanding the law (find out if you are protected by rent control regulations and understand how much of an increase is legally permitted), and (ii) if you aren’t protected by rent control regulations, really get a grounded understanding of your current market rents.
If you can show your landlord that they are either violating the law or that they are overpricing their unit, you may be able to bring them down to a reasonable (and legal) level.
Other options include offering to sign up for a longer lease term (vacancies can kill profits for a landlord, so a longer term lease can be attractive).
If you are handy around the house, you may even offer to take care of minor repairs and the like in exchange for a lower rent.
These are all options that have worked and are commonly used strategies.
The Bottom Line
So there you have it – a comprehensive look at rental price and what is reasonable. Hope this has been helpful and happy renting!