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Rent rising after your Covid deal expired? Here’s what you can do about it
A CFP offers three ways tenants can deal with rent price increases.
If you were lucky enough to grab a good Covid deal on your current apartment — such as months of free rent, a reduced rent rate or free parking — you might be out of luck on your next apartment search. As people move back into cities to return to the office, and as wishful home buyers are priced out of an expensive housing market, rent prices have increased substantially.
According to Redfin, an online real estate brokerage, average rent increased 14.1% year over year, with some of the biggest price hikes occurring in metropolitan areas like Austin, New York City and Miami.
While many managed to snag exclusive Covid deals on their apartments last year when demand was low and supply was high, those deals have since become harder to find. Real estate search engine StreetEasy found that in the third quarter of 2021, only 22.4% of Manhattan rental units received a concession, down from a peak of 42.8% in the first quarter that same year.
This leaves many wondering: If my landlord or management company is ending their Covid concessions or raising back my rent to normal rates, should I try negotiating with them or just start looking for a new apartment?
Below, Gordon Achtermann, a Virginia-based CFP at Your Best Path Financial Planning, offers three ways tenants can deal with rent price increases.
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1. Know your state and local laws
Depending on the state or city you live in, there may be laws that restrict the amount that landlords and management companies can increase rent. There are also laws that require tenants to be warned of rent increases a certain number of days before the change is effective.
For example, Oregon is the only state that has a statewide limit on how much landlords can raise rent year over year, which is 7% (plus inflation). However, if you're living in New York City, landlords can raise rent prices by any amount on market-rate apartments but are capped on how much they can raise rent for rent-stabilized apartments.
You'll need to do some research into state and local laws to determine if your landlord has the right to raise your rent prices. Most cities and states have local housing authority websites, too, so you'll want to check those out for information.
2. Negotiate with the landlord
If you've done your research and find that your landlord or management company is acting legally, your next move could be negotiating rent rates directly with them.
To do so effectively, Achtermann recommends putting yourself in the shoes of the landlord: When a tenant moves out, the landlord will have to find another tenant to fill the empty space. If the house or apartment ends up unoccupied for a few weeks or even months, the landlord won't be able to collect rent on the empty space.
Most landlords care about cash flow, so you'll want to negotiate a rent increase with a number that makes sense, Achtermann says.
For example, say your monthly rent is $2,000 and the management company is raising it to $3,000 (a whopping 50% increase). If it takes the landlord one month to fill the apartment, they'll be losing out on one month of rent, or $3,000. The landlord is effectively losing $250 per month over twelve months. As the tenant, you'll then want to negotiate down to a monthly rent of $2,750, or $250 less than the proposed $3,000.
Some landlords may also be amenable to receiving a few months of rent upfront because it means that they won't have to worry about chasing down rent payments from a future tenant. This isn't a small lump of cash, however. It's a large amount of money that if you don't have all at once now, is worth considering keeping in mind building for the future.
For this, consider a high-yield savings account that allows your cash to be accessible in the short term, while also offering an above-average interest rate so your money grows faster than in a traditional savings. The Marcus by Goldman Sachs High Yield Online Savings has no fees whatsoever and easy mobile access. It is the most straightforward savings account to use when all you want to do is grow your money with zero conditions attached. Those looking to do all their banking in one place should consider the Ally Online Savings Account. Though it is a good high-yield account on its own, account holders can enjoy even more benefits if they also have an Ally Interest Checking Account.
And if you're not having any luck negotiating rent with your current landlord, next time you're on the hunt for a new place consider locking in a two-year lease instead of a one-year lease to avoid the prospect of your rent increasing after one year.
3. Seek help through rental assistance programs
Lastly, you may be eligible to receive emergency funding if you have rental debt or are facing eviction depending on your income. During the pandemic, the Treasury Department launched the Emergency Rental Assistance Program (ERAP), a $46 billion program that provides state and local governments with money to assist tenants with rent, utilities and other rental costs.
In order to apply, you'll need to go to your state's or city's ERAP website. Eligibility requirements vary by state and not all states and cities are currently accepting applicants for the program.
If you're facing a rent hike this year, know your options before complying or vacating to find another place.
Tenants should research the rent pricing rules in their city and state, try negotiating with their landlord and see if they are eligible for a rental assistance program.
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