Rent, yearly increases, and how much can I actually afford?

[zillah975]

So, I may not be thinking 100% clearly about this, due to some RL stuff (two deaths in my immediate family, craziness at work, etc), but let me lay this out for y'all and then ask a couple of questions.



I've been living in my apartment for 4 years as of August 31st. My lease is up for renewal, and the rent they've offered me to renew for 12 months is 12% higher than my current base rent. For 10 months, it's 10% higher. Less then 10 months and the rate skyrockets even further. A 12 month lease would put my rent at 34% of my net income.

When I questioned this, they assured me that it's standard. But that doesn't make sense to me, because if rents for current residents are rising at a rate some 2 to 6 times that of what most of us can expect for a salary increase -- if we can expect one at all in this economy -- than how are we supposed to develop any kind of stable housing history? Are we to either expect move every year or two, or to chose a place that's half what we can afford now in hopes we can still afford it in 3 or 4 years? And how are apartment managements supposed to maintain any kind of stable community? They'll just have a constant stream of folks moving in and out as current residents are priced out of their homes. That seems like it would lead to an unhealthy community and would negatively affect their ability to get folks to come live there.

And second, so, of course I've been considering moving. I'll be talking to the leasing agents about this increase thing, but I doubt they'll write anything into the lease for me so it's really just a conversation -- I was told here that rents never rise very much either. And I've been trying to figure out how much rent I can afford. My credit card debt is about 5% of my net salary and my car payment is around 12% of my net, and that's the only debt I have right now. After that, I have pretty much just the usual expenses -- insurance of various kinds, groceries, gas for the car, cable, mobile phone, etc.

But when I look for "how much rent can I afford" calculators, the one thing they never tell you is whether you're calculating on annual net income or annual gross income.

And so, the questions:

Does it make sense to y'all that rents would typically rise 10-12% for current tenants each year? Have other people here experienced this same kind of rent hike? How is a resident supposed to manage that if their salary isn't increasing at the same rate? (And if your salary is increasing at that rate, where do you work and are you hiring?)

And assuming that rents don't rise more than 5% on a current resident, does anyone know what percent of their net income a person should expect to pay in rent?

Alternately, if you have found that lease renewals typically offer such a high increase, how do you plan for and manage that?

Comments

[sapote]

Well, as far as the theory of it: do you live in a town/city with a lot of students? I live somewhere where rent is basically pegged to the cost of on-campus room and board, since most apartments just need to be a little under the cost of campus housing to find tenants. And that's been going up as the state has budget problems and dumps costs onto the students...

In general? I think it's a good example of how there's usually not anyone in charge of making sure that things like this make sense. Maybe your apartments are currently under the area market rate for similar units and they're trying to ease their way up to that rate without displacing all their tenants at once and having a bunch of empty apartments to fill? Or maybe it's just currently market practice to squeeze tenants for all they've got and get new tenants who are slightly richer until they run out of people to squeeze. As we've seen in the last couple of years in the US, real estate practices aren't always well-thought-out.

I wish I had better advice - I basically just live in terror that the senior citizen who rents to me will notice that she's renting way under market value even given that it's a pretty amenity-less place. If I were a better money-saver right now I would personally be looking at buying a condo, though, to get myself out of the rental market. I'm not sure if it's really better, but it seems less chaotic.

As for the percentages, our local affordable housing board thinks that 1/3rd of your net income is okay. My experience is that anything more than that gets unlivable fast - I think we've got pretty similar loan payments, though mine are for student loans.

[carolyn_claire]

When I was in college 30 years ago, it was standard practice for landlords to raise the rent like this every year. You either paid it or moved to a new place yearly and started over. Those who really liked where they were stayed and paid, but most of us moved. There were always more renters, so the landlords went for what they could get.

[zillah975]

Gah. I'm starting to think I should just buy again, except for that pesky downpayment problem....

[zillah975]

Yeah, I live in a city with a lot of students, but the apartments I'm in aren't student apartments -- if this were the 80s, we'd call them Yuppie apartments. Youngish career folks, though there are some folks more my age (48).

I am crossing my fingers that the senior citizen you rent to never raises your rent!

And yeah, I owned a condo for about 10 years, but the neighborhood went downhill (gunshots at night, etc) and the HOA was filled with shady jerks, so I finally sold it. There are advantages to home ownership, but I urge you to pay attention to things like the covenants and the HOA and so on before you buy. My HOA would fine you if you put any color blinds in but beige, and then there was the whole vinyl siding fiasco that wound up costing the residents around $2k apiece just to get shitty vinyl siding that didn't actually stay up through a mild windstorm. :/

[indywind]

1/3 of net income seems to be a pretty common standard for calculating affordable housing expenses.


My rent and lease experience hasn't included sharp increases at renewal time, but that was a little bit my planning and a lot of luck --I mostly managed not to rent or lease from landlords who were in it for profit --mostly individuals who came right out and said they would rather break even with stable tenants than make more money and have to worry about constant tenant turnover and the wear-and-tear on their property from people who treated it as disposable. But I'm aware that the other set of priorities is really common, especially in areas where there is guaranteed high turnover anyway (around universities, some industries, larger cities).

[sapote]

Seconding the advice about private landlords. People who are investing their own time into finding new tenants, handling cleanup between tenants, etc. are going to almost definitely be less cavalier about turnover rates than large companies who have multiple people on payroll to handle that stuff.

[zillah975]

*nodsnods* I've had...interesting landlords when I've rented from individuals. The woman who lived across the street who would call at 6AM to tell us to close the windows because it might rain and if our windows were open the windowsills would warp. The guy whose emergency contact didn't know who he was, which we discovered when the heat went out in dead winter and we couldn't find him, and who eventually skipped town and went to Kazakhstan with our deposit so he could be with his Russian teacher.

But it could be worth looking into again. I'm sure there are lots of landlords out there who don't provide great stories for cocktail parties. :)

[dorothean]

My rent definitely hasn't risen that much. I live in a one-bedroom apartment in a complex with several hundred units. I had a 13-month lease when I first moved in, $575/month. I renewed my lease for another 13 months at $580/month (at first they said it would increase more, but they gave me the $5 increase as what they said was a special promotion). Then I renewed it again for $590/month, which was originally going to be $595 but when I asked the rental manager for less, she agreed.

I'm in a fairly decent location, but I think the main reason to live here is because it's near a giant complex of research businesses. There are some students, but they're not the majority, so I think most of the tenants might realistically stay around for a while; maybe that's why the increase isn't so much. (I wish it were $0, myself!)

[zillah975]

*nodsnods* See, that's the kind of neighborhood I live in, where you would think they'd want a stable community. But apparently not.

Although I emailed the regional VP of the parent company, and the woman in charge of my state is going to check the lease renewal on Monday. Here's hoping they don't tell me they actually offered me a lower rate than they should have.

[devilc]

That sounds kind of steep for a step up.

If you like the apartment and have been a model tenant (paid on time, takes good care of the place) and don't foresee a need to move, consider making them a counter offer: A 2 year lease agreement at a 6% rent increase.

[zillah975]

I tried talking them down, but they're all "Our hands are tied, these decisions are made by automated systems."

So now I'm talking with the parent management company. We'll see if this makes things better or worse. :/

[vass]

Where I live, the standard market rent for the type of flat I have (a small two-bedroom) would be 49% of my income. That's with rent assistance from the government. Granted, I'm on a low income (below the tax threshold, so this is gross and net income.) But it was still too much for me to afford, so my parents bought a property and are renting it to me at more like 15% of my income.

In some places it's only legal for the landlords to increase the rent by so much, and they can only do it so often. Maybe check with a tenants' rights group and see if that's the case where you are?

[zillah975]

D:

49%??! JEEZUS. That's OUTRAGEOUS. I'm so, so, so glad your parents can help you out!

And yeah, I've looked around at what I can find online about the laws here, and basically it doesn't seem to be addressed. I guess they can raise it as much as they want.

[vass]

I live in Melbourne, Australia. There's a huge housing bubble here, and in most of the other state capitals. It's gotten to the point where the public housing list has stopped adding non-crisis people to the list, and the crisis list has a ten year wait. And for people buying a home, suppose it was a first home for a young couple or something, that'd be $200K if they're lucky, but more likely $400K. And that's not just selected areas, that's within a two hour radius of the city centre.

I know the US's housing crisis is much worse in the other direction, but I nearly cried when I saw that news item about the fourteen-year-old girl who bought a house with her pocket money.

[jenett]

Certainly not typical in my experience. (I've rented apartments near Boston, in Minnesota, and now in Maine, from both private individuals and property management companies.)

My rate increases have been more on the line of 5% at the high end, and noticeably less than that most years. The couple of times it's been 5%, there's usually been a specific reason for it: they'd been holding rents low for several years during a bad time in the local rental market and it's strengthened again, they'd made some renovations that made it a more pleasant place to live, that kind of thing.

For people looking for a mortgage, the general recommendation for payment + insurance + related expenses is 35% of net, which is a decent starting place even if you're renting.

To give you a little context:
I'm about to move into a place that's $475/month or about 21% of my net (which is not huge, I should say!) for rent, plus about another $30 a month for electric (everything else is part of my rent) - but I'm living in rural New England.

When I was living in Minnesota, I was paying about $750 including heat/electric/etc. at my last place, which was (with a somewhat higher salary most of that time) about 25% of my net.

[zillah975]

Hmmm. 35% of net.... That would give me some wiggle room. I was thinking maybe 30%, which I'd still like to find, but if I could theoretically go as high as 35%, that makes the panic in my chest ease up a little. I don't carry much debt, but I do have some insurance and medical expenses that kind of make up for it. But then I think sometimes that I have an exaggerated idea of how much cushion I need to keep in my checking account. Idk, no one ever trained me for adulthood.

[foxfirefey]

They way you describe it, the apartment complex isn't rising rates 10-12% every year--it's once in the four years you've been there, which is closer to 3% a year. It's still a hard thing to swallow, but you should look around the area and see what the market rate for your type of apartment is. Rents have been rising most everywhere in the US, at least.

[panda]

3% increase per year is what I experienced when I rented at a couple different places from 05-09. If your rent actually stayed the same for the previous 4 years, that is unusual to me. But if it has actually been a 10% increase /each/ year, then that does seem excessive.

Also 2nding everyone who's said rent should be no more than 1/3 of your monthly budget. When I was a poor college student trying to rent a place off loans and donated money from my parents, when I applied to rent at a new place, part of the application involved saying what my monthly net income was, ie how much money would I actually have to pay the bills? I was told by the employee who was over-seeing my application to exaggerate how much money my parents were giving me each month, because the company would reject my application if rent was more than 1/3 of my "income." I guess this is because in the company's experience paying more than 1/3 of your income in rent is unlivable in the long run, and so those kinds of renters are more likely to flake out on them. I did always pay my rent, but I also had to beg my parents for emergency additional money several times, so yeah, having your rent be more than 1/3 of your monthly budget is not a great idea.

[zillah975]

Yeah, it's increased every year I've been here, though not by 10% each time. The increase itself has approximately doubled each year; if I stay and the trend continues, then next year it'll go up by another $220. And I just don't know who can afford that kind of increase, you know? Who gets raises that can match that, and can I have their job?

[panda]

Oh that is total bullshit then. I was renting in a university town with a lot of turnover etc and the highest increase I ever saw was 5%.

I really have no idea how they think that kind of increase is sustainable.

[zillah975]

Mmm, I wasn't clear, then. They've raised it every year I've been here, each time approximately doubling the previous increase. The first increase was about $30, the second $55, and this one $110. Or $93 if I take the 10-month lease. And yeah, it isn't that the rate is bad for the area, it's that I can't figure out how anyone is supposed to maintain any kind of residency history if our rents are rising at several times the rate of our salaries.

[holyschist]

I think our rent (we live in an apartment complex owned by a large company) went up by about 9% last year. Arguably, they did a lot of "improvements" to the complex (remodeled the renting office; put in a weight room we don't use; remodeled the laundry room which meant we had no laundry room for about three months last fall; remodeled the mailroom so now we have no outgoing mail; did some resurfacing of parking lots (yet it still turns into a lake when it rains); turned some covered parking into garages (which cost extra to rent).

Before that they claimed they were "under market" from the previous owners and had to raise rents to compensate. I'm not sure how long we'll be paying for the mixed bag of "improvements," but if we could find anywhere that wasn't worse within our geographic limitations and that didn't charge an astronomical non-refundable pet fee and monthly fees on top of that, we'd move in a heartbeat.

The private rental market might be better on the rent front (we had...bad luck with the private market, in the past), but at least around here it tends to be largely anti-pet.

[zillah975]

Yeah, the first few private rentals I checked were "no cats", so that's a deal-breaker. I'll probably look again, but that was discouraging.

[viklikesfic]

Wow. And here I was all pissed off and freaking out because my rent went up $35 this year instead of $10!

Everywhere I've lived for the past six years has been a $10/year increase, including one very college town and one large city. It sounds to me that they're being unreasonable.

(I've also been considering buying, myself, but that's such a scary leap!)

[xoxomarina]

My rent has been $1085/mo for a 1 BR for the past 4 years and it has never gone up. I think they're allowed to increase but choose not to, in order to keep their tenants.

[lassarina]

Rents in general in the US have been rising, particularly in metro areas that aren't the top 5 as those places experience something of a boom even in the crap economy. I live in a suburb of Chicago that's hell on wheels for property values (in the "dear God if I were buying I could never afford to live here" way) but quite nice for renters, and we started out at $1495/month and are now up to $1540/month, plus $60 for a second indoor parking space. My prior apartment did not raise rent at all the two years I was there, but the one before that bumped quite a lot the second or third year (this was 2005-2008, when property values were soaring on the bubble.)

30-35% of net income sounds about right; I pay somewhat under 25% right now, but I have a *lot* of debt that I try to put a third of my income toward, and I live outside the city which makes commuting a bit inconvenient, though there's always the train.

EDIT: We have a 2BR 2BA with central A/C and heat (tenant paid) and two indoor parking spaces, dishwasher, and on-floor laundry, which is $1600/month now.