July rental advice: As rents rise, what's a renter to do?
For those who rent, this is what they call a 'bummer in the summer': More tenants vying for fewer spaces means everyone gets stuck with a higher bill. But being a good tenant can pay off.
Here's hoping you found a nice rental last year and locked in a low rate, one that can stick for, oh, about three years. That's because — and we're so sorry to report this — the rental market has once again shifted in favor of landlords, with little sign it's going to swing back any time soon.
In this month's rental column, we'll take a look at why and note areas with the sharpest price increases.
But hang in there, because we've also got some fresh ideas on what you as a renter can do to avoid getting sucked into the vortex of spiraling rent hikes. (Hint: Being a model tenant helps.)
What might Charlie Sheen say about landlords? 'Winning!'
Just a year and a half ago, landlords were itching for tenants. The national rental-vacancy rate sat at a peak of 8%, its highest level in nearly a decade, after the recession drove tenants to move in with family or friends.
By early 2010, however, the national vacancy rate had dropped to 6.2%, according to Reis Inc., a real-estate analytics firm. And it's expected to hit 5.5% by the end of this year.
For tenants, this is bad news. Landlords are yanking the once-ubiquitous "one month free rent" signs and other offers they'd used to draw tenants. They're raising the rent.
Effective rent — what you pay after compensating for the value of those incentives — rose 2.36% on average in 2010 and is expected to rise an additional 4.3% by the end of this year.
"We haven't seen that kind of rent growth that we're expecting in about 10 years," says Brad Doremus, an analyst at Reis. "I think it's pretty reflective of strengthening demand."
And things get worse. An analysis by Axiometrics, an apartment-research firm, found that rents have jumped in markets where employment has resumed and where it hasn't, which puts the squeeze on renters at both ends of the economy.
"The apartment market really turned around in 2010," says Axiometrics President Ron Johnsey, who expects rents to continue to rise through 2013 at a national average of 5% to 7% a year. "In some markets, you're seeing double-digit increases in rent."
A February article in Multifamily Executive, exalting expected record growth in rental prices, says, "Landlords are firmly in the driver's seat when it comes to pricing tenants." Author Chris Wood writes: "And for most apartment operators, the question isn't how high will rents go, but how high won't they go?"
So what's driving this?
Here's a quick look:
- Fewer rental properties are available. According to Harvard University's Joint Center for Housing Studies, the number of available multifamily units declined by an average of 240,000 units per year from 1999 to 2009. The reason is twofold: Fewer new apartment buildings were built in the early 2000s, and the existing stock aged out of use.
- Foreclosures drove former homeowners into the rental market. According to Harvard's center, at least 3.9 million Americans who owned homes in 2004 are now renters.
- People are renting longer. Would-be owners who suspect housing prices aren't done dropping are waiting out the market. In the meantime, add them to the growing number of renters.
- People moving for jobs are renting. In areas with recent job growth, newcomers are flooding the rental market.
- Renters are spreading out again. Those who had doubled up during the recession appear to be returning to their own, private digs as the economy picks up, experts say.
- Mortgages are hard to come by. Banks' tough lending standards are adding to the glut of renters. Even people who want to buy can't.
Where renters are most likely to get stuck with a higher bill
Reis tracks rent prices throughout the country. Below are the areas where rent is expected to rise most this year and the weighted average for asking rent after that increase; weighted average takes into account the number of apartments at a certain rent to approximate a median more closely. Percentages reflect the increase in asking rent from the end of 2010 to the end of this year. The increase in effective rent, which includes the cost of incentives, is typically even greater.
- San Jose, Calif.: Rent is expected to climb 6.85% in this Silicon Valley hub, to $1,635.
- New York: The forecast is for an increase of 6% in asking rent, to $3,038.
- Washington, D.C.: Rents in the nation's capital should rise 5.4%, to $1,521.
- Greenville, S.C.: Here, where job growth is strong, rents are expected to rise 5% to $677.
- Suburban Virginia: The areas outside D.C. approximate to the capital should expect a 4.9% increase to $1,561.
- Portland, Ore.: This trendy town in the Pacific Northwest, which shouldered some of the biggest unemployment numbers in this recession, should see rents rise 4.8% to $879.
- Suburban Maryland: Rents here are expected to rise 4.7% to $1,364.
- Chattanooga, Tenn.: The site of a new Volkswagen plant and Amazon.com office should bring workers — and rental-price increases of 4.7% to $659.
- Orange County, Calif.: Even the county that suffered some of the greatest foreclosure losses is seeing a recovery in the apartment market, with rents expected to rise 4.6% to $1,586.
- Houston: As healthy job growth attracts new residents, rental prices should rise 4.4%, to $822.
What's a renter to do?
The news appears even grimmer when you consider that rents have already been rising faster than income for years.
But on a positive note, there are steps you can take to stave off steeper rent.
1. Know your landlord's competition: One popular piece of advice is to become very, very familiar with the market — essentially, "look harder." Network through friends, drive neighborhoods, ask about a sale property that's languishing on the market, and check out all the websites, such as HotPads, Cazoodle and Craigslist.
2. Don't be a high-drama tenant: Oft-forgotten is that you should think like a landlord. Raising the monthly rent isn't the only way that landlords maximize their income. They need to minimize expenses, too. That means keeping a unit from sitting empty even for a month. And it means finding renters who not only pay their bills but also don't call maintenance every other week with some kind of problem or complaint.
"If stuff is broken, absolutely, tell the landlord immediately," says Dennis Fassett, a Detroit landlord and owner of Michigan Property Solutions.
Beyond that, though, leave the landlord alone, and the landlord will be keen to do the same for you, meaning no rental increase.
"If I don't hear from them all year and they're paying their rent on time, geez-oh-Pete, I don't raise their rent," Fassett says. "I am more than happy not to raise their rent."
Even in a big complex, management may recognize good behavior. But you'll likely have to ask for it.
3. Don't roll over: Axiometrics' Johnsey says to not accept a price increase automatically when you're notified of one. Instead, make an appointment to meet with management in person. Do your homework to see what other apartments are charging. See if your landlords will lower the rate with an extended lease.
"There's a bunch of costs they'll incur by not renewing you, so be aggressive," Johnsey says. "Say, 'I've paid on time, I've been loyal, I can pay some increase but not that much. Let's see if we can work something out.'"
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This article seems lopsided. Owning rental property is a business. Landlords are faced with rising real estate taxes, rising water & sewer bills, rising property insurance costs. Like every business in the world, when the cost of providing a product or a service goes up, the cost of the product or service to the end user goes up as well. Blaming landlords for high cost of renting is like blaming a local gas station owner for the high price at the pump. In most cases, landlords are simply passing along a portion of the cost increases that they themselves are confronted with.
Relax! Renter comments are probably not aimed at the Ma/PA Landlords who own one or just a few units.
It's the big apartment complexes that are raising rents beyond reason.
Yet, it is sometimes understandable, because many renters live like pigs and have little or no respect for another's property. Unless you see for yourself, you won't believe how some renters leave the property when they are forced to vacate the premises.
Look at the way they dress or take care of their junk cars which sit everywhere. Say anything to them, and they go off on you to the point of almost losing it. It's almost as if they feel entitled to leave a place in shambles.
And, you know, it's not about race. It is about culture, or the lack thereof. Poor, uneducated whites are among the worst.
The problem is, most non-educated people of all races, have not had an increase in their wages for almost thirty years. The are stressed to the max; feel victimized, and don't know who to blame. Thus, they lash out, and unfortunately, it might be against your rental property. I suspect that it's only going to get worse - - much worse.
It is true that the rich and powerful are taking everything they can get their hands on from the poor and unfortunate. Who are the targets of Politicians at all levels? We all know the answer to that: senior citizens, the disabled, poor, the unemployed, and even young children.
They have taken one's job and sent it overseas; they have now taken one's home through subprime loan schemes; they have stolen 37% of the accumulated wealth of senior citizens and holders of 401k's, 403b's and 457 deferrred comp plans.
Six or seven million average joe's have lost their jobs during the current recession that was caused by Wall Street, and the lack of Congressional oversight. those jobs are never coming back, regardless of what one might hear.
And now, a new Wal-Mart Nation is in the making, and 85 - 90% of Americans will be applying for membership. Tis said, but true!
We are tenants and have been here for 4 years. Our base rent has not increased. We are pro active with the landlord. He has provided a lawn mower and we cut the grass and shovel sidewalks. We take care of minor repairs where we can. We have only called for help once. The place always looks good because we treat it like we own it. Sadly, most renters are not that conscientious. Recently we had a neighbor cut down a bush that was flattened by the snow and the landlord paid 2/3 of the cost to grind the stumps and level the dirt. We seeded it and the grass is doing well.
My advice to renters is to take care of the place you rent and your landlord will appreciate it in the form of keeping the rent payment level.
My last tenant defaulted on two months rent, ruined the carpeting, punched a head sized hole in one of the walls, stole the window blinds, broke the stove, left three rooms full of debris and it cost me $500 in court costs before I could legally evict his deadbeat ****. It's going to cost me two years worth of rental income to repair all of the dammages.
My landlord just gave me an option. He will either raise my rent or leave it where it is. If he leaves it, he will not do any repairs because he will not have the money. I have been here 3 1/2 years. Can he refuse repairs without a rent increase?