How To Build Your Rent Increase Process

Written By: Fair Housing Insititute

Did you know? If you don’t handle your annual rent increase effectively, it can lead to a fair housing violation. Navigating annual rent increases is a critical aspect of property management that can significantly impact your success in resident relations.

That’s why in this article, a step-by-step comprehensive overview of the processes and strategies involved in managing rent adjustments effectively is addressed. Let’s delve into the finer points of this crucial management task, ensuring you’re prepared to handle this annual challenge with confidence and professionalism.

Understanding Your Housing Type

First and foremost, it is crucial to recognize that the guidance in this article applies exclusively to private market housing. Properties that receive federal funding or benefit from tax credits operate under a different set of rules, often with complex requirements and strict regulatory oversight. For private market housing, however, property managers have more autonomy but must navigate rent increases with a clear and strategic approach to avoid potential pitfalls.

Option 1: Percentage Rate Increase

Many industry experts endorse the percentage rate increase method as the simplest and safest strategy for annual rent adjustments. This method involves applying a consistent percentage increase across all units, which helps property managers avoid perceptions of bias and simplifies administrative processes.

By standardizing rent increases, management can efficiently calculate and implement changes, ensuring transparency and fairness. This uniform approach not only eases the workload but also fosters resident trust, as everyone is subject to the same increase. Consequently, it lessens the likelihood of disputes or claims of unfair treatment, maintaining harmonious resident relations and supporting stable occupancy rates.

Option 2: Negotiations for Rent Increase

Alternatively, some property managers might choose to implement negotiated rent increases, which involve adjusting rent based on individual resident circumstances. This method can offer enhanced flexibility, appealing to both managers and residents in specific markets or unique situations where a personalized approach is beneficial. However, this strategy carries inherent risks. Negotiations can inadvertently create perceptions of bias if not handled consistently across all cases, leading to potential fairness issues.

Moreover, the negotiation process itself can be a double-edged sword. While it allows for tailored rent adjustments, it may also lead to resident dissatisfaction. If residents perceive the negotiation as unfair or favoring others, they may be less inclined to renew their leases. This inconsistency can not only disrupt resident relationships but also affect the overall resident retention rates, posing a significant challenge for property management. Thus, while negotiation offers flexibility, it requires careful, transparent handling to ensure it benefits both the property management and the residents equitably.

Importance of Follow-Up and Training

Regardless of the method chosen for rent increases, consistent follow-up and thorough training for everyone involved in the process are vital. Property managers, leasing agents, and other staff members should be well-versed in the principles of fair housing, as well as your properties policies and rent increase process to prevent any inadvertent discrimination. Consistency in handling rent increases not only helps in maintaining good resident relations but also serves as a protective measure against fair housing complaints.

Documentation plays a critical role in this process. Maintaining detailed records of all communications, decisions, and rationale behind rent adjustments is indispensable. In the event that a rent increase is questioned or challenged, having robust documentation can be your greatest defense, demonstrating transparency and adherence to fair practices.

Are You Aware of the Pitfalls?

For property management professionals in the private market, navigating the nuances of annual rent increases requires a balance of fairness, strategic planning, and diligent documentation. By understanding the types of housing, choosing the right strategy for rent increases, and investing in proper training and documentation, you can help avoid the pitfalls by making sure your property management practices comply with fair housing laws.

Remember, in property management, clarity and fairness are not just good practice—they are your best allies in building trust and success in your housing ventures.