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Rental prices are increasing rapidly across the U.S., and it’s putting landlords and tenants in a very difficult position. Our Rental Price Update reflects that rental rates have gone up by 16.7% nationally, putting the median rent price at $1,827. In Philadelphia alone, rental rates have gone up by 7.6% over the last year, with 1-bedroom rentals going up by 4.1% and 2-bedroom units going up by 6.1%.
These increases can help you better manage your finances during this time, but it can also put a strain on your relationships with your renters. However, you can properly manage your rent increases this year by understanding the trends and following the right strategies.
Why are Rental Prices Increasing?
It’s hard to ignore the increasing value of goods, services, and utilities. So, it’s no surprise that rental prices are following suit and rising in value because of inflation.
Though the value of items and properties tend to increase over time, an article on inflation by AskMoney points out that national debt and economic status, as well as supply and demand, can further drive the prices of assets. Now that the U.S. national debt has increased, buyers and renters have to pay more due to the higher prices of properties. Landlords also have to face the financial burden of upkeeping their properties, so they need to cover the steep costs of maintenance services and items by increasing rental prices.
On top of that, rental prices are also increasing due to supply and demand. Rentals had the largest increase in more than two years, since The Guardian revealed that there is less housing available for rent now than anytime in the past 30 years. As inflation continues to soar while the available units are limited, landlords have to compensate by increasing the value of their rental properties.
How Can You Manage Rent Increases This Year?
Assess the fair market rent of your property
Landlords have the right to increase their rental prices, but it doesn’t mean that you can set any price you want. In fact, The Balance SMB states that landlords have to follow the fair market rent amount, which is calculated based on the location, size, amenities, and demand for units in your area. Try to find at least three similar properties in your area and calculate their average so that you can determine a fair price for your property. You can also go to our free rent analysis to get an estimate.
Review the terms and conditions of your lease
Each tenant may have specific lease terms and conditions with you, so it’s crucial to read through the agreement between both parties. Review your agreed policies on the frequency of rental increases, advanced notices, limitations for rentals so that you can maintain the trust and loyalty of your tenants.
Communicate the rent increase to your tenants
After reviewing the terms and conditions of your property, you need to follow the Philadelphia Fair Housing Ordinance which requires landlords to provide at least 60 days of written notice for leases that last for a year or more. Meanwhile, you need to provide 30 days of written notice to those who are staying for less than a year. Apart from communicating the new rates, you should also explain the reason for the increase so that you can raise your rent and retain your tenant.
It's your right to increase your rental prices, but you should still maintain a good relationship with your tenants in the process. Since inflation and consumer demand are driving prices up, take the time to communicate any rental changes with your renters.