Everything is expensive these days – especially the price of real estate. From 2017 to 2019, rent prices increased by an average of 3.3% each year. Thanks in large part to COVID, rents increased by an average of 11% in 2021. Some experts speculate that rent prices will not level-off anytime soon.
Considering inflation rapidly rising, rising rents could make people “house poor.” A “house poor” individual spends 30% or more on their monthly income on rent or mortgage payments. Unfortunately, salaries are not keeping pace with housing and inflationary costs. That means more people are likely to become house poor soon.
Property owners suffer the pain of inflation too. Unfortunately, raising rents is the only way a property owner can keep pace with the cost of utilities, insurance, maintenance fees, and property taxes. Landlords probably have mortgages on their properties as well. So, even though you may not like to hear it, some experts say that a 3% to 5% annual rent increase is reasonable. Notwithstanding, raising the rent more than 5% should send a signal that something is wrong and needs to be addressed.
State law grants renters’ certain rights as protection against unscrupulous landlords. One of the many rights renters enjoy is the freedom from increased rent without warning. A necessary corollary to that is the freedom from increased rents owning to an unlawful reason like discrimination.
Property owners must follow state law to raise rents lawfully. Each state has its own requirements. However, landlords must give tenants proper notice before they raise rent no matter where they live.
Renting without a written lease is called a tenancy at will. In a tenancy at will, the landlord rents the home to the renter with no terms other than rent payment at an established amount and at an agreed interval. The tenant can rent the premises indefinitely if they continue to pay rent. In this situation, most state laws require the landlord to give 30-days’ notice to the tenant of a rent increase. The notice must be in writing, and the better practice for landlords is to send that notice by certified U.S. with a return receipt requested. The return receipt acts as proof of delivery of the notice to increase rent.
If the tenancy is expected to last for a year or longer, state laws require the parties to execute a written lease. The written lease governs the terms of the parties’ agreement, including how and when the landlord can raise the rent. The parties are free to agree on any terms that they want provided that the lease’s terms do not violate any laws. Therefore, a landlord could increase the rent before the lease expires if permitted by the lease. If not, then the landlord cannot raise your rent until the lease period ends and you enter a new lease.
The tenant is entitled to notice if the landlord will increase the rent after the lease expires. Once again, notice of rent increase must be in writing with proof of delivery if the lease ends and the tenant have the option to become a tenant at will. Otherwise, the tenant and landlord can enter into a new lease agreement with new terms, including a rent increase. That might mean increasing the security deposit. Although your rent is going up, you have really entered into another lease agreement with updated terms that is essentially independent of your prior lease.
Disputes regarding rent increases can arise in two ways. The first is as a defense or counterclaim in an eviction proceeding. The second is in a lawsuit seeking damages and other relief for discriminatory housing practices.
Rent increases can violate the law for any number of reasons. As we discussed above, if your landlord failed to follow your state’s law regarding notice of a rent increase, then you are not liable for the difference between your old rent and the increased rent. Also, if you live in a home governed by rent control laws, then you could defend an eviction if your landlord raises your rent without following rent control laws. Moreover, all rent increases based on a discriminatory motive are illegal. Additionally, a landlord who raises rents in retaliation for a tenant asserting their rights is unlawful as well.
Raising rent for a discriminatory reason violates both state and federal laws. No one can discriminate against another person based on their race, gender, ethnicity, sexual preference, age, or religious beliefs. For example, assume a landlord owns several apartment buildings in a large U.S. metropolis. Although the landlord rents to anyone who qualifies, the rents for a certain ethnic group are 20% higher than all others. This is evidence of housing discrimination.
Tenants have a right to live in safe homes with running water, sewer, utilities, and free from rodents, at a minimum. Complaining to your local board of health about problems in your building is the appropriate step to take if your landlord refuses to repair the problem. Consequently, your landlord must repair the problem and cannot retaliate against you for asserting your rights.
Rent control is a method of capping rent increases to set amounts for a particular unit. Usually, the real estate market in each geographic area establishes the parameters for rent. However, some cities and even a couple of states have enacted rent control laws to prevent market rates from pricing most people right out of the market entirely. Therefore, market regulation provides affordable housing for low- and moderate-income tenants. Often rents stay significantly lower than market rate. That does not mean landlords subject to rent
Rent control is more common in larger cities across the U.S. where rents can be extremely expensive. Places like New York, San Francisco, Los Angeles, and Washington, D.C. have rent control laws. Entire states of Oregon, Maryland, and New Jersey also have rent control laws.
In practice, there are two distinct types of rent control. In a true rent control scenario, known as “vacancy control,” the landlord can raise the rent to the maximum amount allowed by the local rent control board only after a renter moves out. The rent can only go up a small amount each year, if at all.
The other variation of rent control is known as “vacancy decontrol.” This means that the landlord can increase the rent to whatever the market will yield. Some jurisdictions limit the percentage of increase. However, once a new tenant signs a lease, the landlord is only allowed small rent increases by law.
Rent Control in New York City operates differently from other cities. To be eligible for rent control in New York City you must be living in same apartment since 1971. That’s a long time. Thus, it only pertains to about 1% of current renters.
New York’s rules are geared toward rent stabilization. The New York City Rent Guidelines Board votes annually on the rent increase. Reports indicate that the Board keep rent increases between 0% and 4.5% each year.
You are your best advocate. Review the local law to ensure any proposed rent increase is legal. If you have a lease that is for one year or longer, then you should sign a new lease locking the landlord into a fixed rental price. Your landlord can ask you to leave at the end of your lease term and bring in a new tenant. However, landlords must renew leases in rent-controlled apartments every year. Only the tenant can decide when to leave, assuming the tenant has not defaulted on the rent.
If you are a tenant-at-will, then ask the landlord to prepare a memorandum or understanding regarding your rent increase. You can also engage other renters to form a co-operative to collectively bargain with the landlord if you live in a large apartment building.
Remember that you have an obligation to pay the rent and any increases if they are legal, even if you disagree or they create a financial hardship. That means you must pay the rent increase to avoid eviction. You are not bound to accept the rent increase. You may want to ask for more time if the increase causes a financial hardship or offer to perform a service for the landlord in exchange for a discount on your rent.
If you are having legal trouble, you should speak with an experienced real estate attorney who specializes in renter’s rights. Talking with the right lawyer as soon as possible can help you with your housing problems.