In many parts of the U.S., there are fewer rental units, and a greater percentage of Americans are renting than they were just a few years ago.
Those are two key findings contained in the latest research by the U.S. Census Bureau on the housing market. The national vacancy rate dropped from 8.4% to 7.4% between 2009-2011, while the number of households that rent grew from 34.1% to 35.4% during the same time. In many metro areas, renters are also spending a higher proportion of their household income on rent.
This development and the 12-year low in housing inventory have combined to create a market that would seem to favor landlords and property managers. But what’s curious in the Census data is that many metro areas (57) had gross rent decreases, while less than half as many metro areas (23) had gross rent increases. This seems to be evidence that property managers and landlords were keeping rents low in light of the recent economic recession, as many Americans struggled with job losses and underemployment.
What will be interesting to see is whether rents will begin to increase as more Americans begin to turn positive about the overall direction of the U.S. economy, as well as their personal economies.
Is now the right time for you to raise rents? Consider a few questions:
- Are there a lot of vacancies in your area? Given the market realities, your tenants will be more or less inclined to absorb a rent increase.
- Are you prepared to scare away prospective tenants that might have been a better fit for your past pricing? Raising the rent might price some quality tenants out of your pool of potential applicants.
- Are you prepared to possibly lose your current tenants? Your best tenants tend to have more options when it comes to finding another rental, while your other tenants may not have as many options and will be forced to absorb an increase. The cost of finding and screening quality tenants isn’t insignificant.
- How will you communicate a rent increase to your current tenants? Sometimes it’s more about how you communicate a rent increase. Make sure you acknowledge that you’re placing an additional financial burden on your tenants, and try to explain why the increase is needed.
Raising the rent is always a tricky prospect, and there’s no black-or-white answer. On one hand, there are the increased costs of running a business. On the other hand, there are the costs of finding and screening new tenants if your tenants move out due to a rent increase.
How are you navigating today’s economic realities as you consider your operating expenses and possible rent increases? What advice would you give to other property managers who are currently weighing their options?Read more on Resident Management