Photo: ella marie
Rent spikes are nothing new but for consumers who managed to score deals on rentals during the housing slump of 2008, the good times are just about over. The nation is currently seeing some of the highest occupancy rates since 2002, according to the National Renters Association. Fewer available tenements coupled with swarms of tenants flocking to fill them up means the ball is back in the landlord’s court and they’re shooting for the three-pointer.
Some regions of the U.S. have already seen rental prices soar as high as 20 per cent, an NRA spokesperson said. Luckily, that’s pretty unusual. Unless you’ve worked out a fixed rate with your landlord, consumers should typically expect about a 2 to 3 per cent annual increase and budget accordingly.
“A free market is a free market,” says Gary Malin, President of New York-based real estate brokerage firm CitiHabitats. “People think there’s no possibility their owner could increase their rent, but they’re going to do what they can to maximise their rents.”
The good news is there are plenty of warning signs out there that could alert you to rent hikes on the horizon. Here are some ways to eliminate the guesswork:
Shrinking classifieds. Keeping up with the general health of the real estate market in the press is the quickest way to gauge the possibility of rent increases, Malin says. If the classifieds section in your local paper is looking sparse in the rental department, it’s a good indicator prices will be steeper.
“(Renters) need to go out and see what the market is,” Malin says. “They should engage a broker or go to open houses, go online and see what apartments are being advertised for and that will give you a sense of how the current rent stacks up in the marketplace.”
Electricity costs rising. Whether you’re in a doorman building or lying low in a basement apartment, you can bet your landlord will be paying hawk-like attention to the rising cost of keeping you warm in the winter.
Foreclosures spiking. Much of the boom in the rental market has to do with previous homeowners losing their houses to foreclosures or trying to downsize to cut expenses, according to the NRA. If there are reports of spikes in foreclosures, you can bet landlords will take full advantage of the sudden deluge of possible tenants and up their asking prices.
A bulldozer is out front. If building managers or landlords plan any sort of improvement to their property, they often hike up rent to meet the cost of renovations. You may enjoy that nice new Jacuzzi in the backyard, but don’t think you won’t wind up paying for it eventually.
Lenders run scared. When banks start getting choosier with their risks like they have in recent months, it means fewer consumers will get approved for home loans. They’ll likely turn to the rental market instead until they can improve their finances sufficiently to secure a mortgage.
Gas prices skyrocketing. When the cost of fuel rises, that means utilities across the board are likely to be impacted. Gas and heating costs are part of landlords’ operating expenses and play a big role in how much they’ll ask renters to pay, Malin says.
Your landlord says so. Unless you live in a rent-stabilised apartment building and have a renter’s board to alert you to price increases, there are no laws that dictate how much notice tenants must be given. If you scored a great deal on a low-rent loft but your bank account can’t handle any extra expenses, ask your landlord in advance if they’re planning to up the rent so you can plan accordingly.