Rent increases are standard in the property management industry. Typically, rent increases are around 3-5% per renewal. Before sending a rent increase letter to a tenant, there are some things to keep in mind. It’s essential to consider the rent increase laws in Lancaster, consequences of increase, calculation methods, and the best way to write a rent increase letter.
Things Consider When Increasing Rent
A landlord has the right to raise the rent annually (or every new lease term), but there are laws to keep in mind. Violating these laws could result in fines or criminal charges. Pay attention to federal, state, and local laws.
Federal Laws:
- Discrimination: For example, if a tenant has given you a hard time or left terrible reviews, you cannot discriminate and raise this person’s rent more than others’ because of it.
- Lease Renewal: As a landlord, you can have full control over the price increase. However, you can only increase rent at renewal. You cannot change the terms of the lease agreement mid-lease. For example, for a 12-month lease, you can only increase in the new year. However, if it’s a month to month lease, technically you can increase each month but need to give 30-days notice.
- HUD: Properties that participate in subsidized housing programs through Housing and Urban Development (HUD) must follow rent increase guidelines.
Local Requirements:
- There are no laws in Pennsylvania that limit rent increases at renewal, however, landlords must give 30-days written notice to tenants before doing so.
Consequences of a Rent Increase
Legal consequences aren’t the only negative outcome of increasing rent. It’s just as important to weigh the other potential consequences listed below before deciding on an increase:
- Losing Quality Tenants: Rent increases that are too high may cause vacancies and deter tenants that otherwise good fits for your property. Leave some room for negotiation to keep good tenants.
- Bad Reviews: Increasing the rent too much may open yourself up to bad reviews or tenant blowback.
- Difficult Tenants: Tenants that may already be difficult may become more so after a rent increase. In that case, it might be best that you find a new tenant anyway.
Rent increases are reasonable and tenants will generally expect it. However, be sure to do your research and calculate accordingly. This way, it will be easier for you to justify rent increases to tenants if the need arises.
Best Calculation Method for Rent Increase
We recommend that you follow calculation best-practices to find a reasonable and practical increase for your property. Some property managers will just increase based on what they want or think is fair. This strategy is not recommended!
- Market Research: Know the area and market rates. Sure, you could just make up an increasing number, but that could result in a vacancy or an angry tenant. If they find another local and similar quality property for significantly less money, they will leave! Research similar properties in the area and know your competitor’s pricing. Knowing the area and competition is imperative for pricing an increase. In addition to that research, understand market rates. Look into national rates for similar properties as well as trends in the rental market before setting a price.
- Use a calculator: Consumer price index times current property rent. This gives you an idea of how much to increase your rent due to national market rates. Keep in mind it is not always a science – sometimes local markets will cause rental rates to vary, but the calculator is an excellent place to start!
Write a Rent Increase Letter 
Now that you have settled on a rate increase, it’s time to write the rent increase letter. Provide this letter 30 to 60-days in advance (depending on your lease) of the increase and include the following information:
- Tenant’s name and property address
- Your name and business address (landlord)
- The date the letter was written, and the day the rent increase starts
- Rent increase amount and current rental rate
- Reference to the lease agreement
- Amount of time the tenant has to give their notice should they choose not to renew
- Sample Rent Increase Letter (CREDIT: Zillow.com)
Are you still concerned about increasing rent? Need help managing rental increases for your Lancaster, PA tenants? Bay Property Management Group Lancaster can help with both! Contact us to learn more about how we can help you lease and manage your rental property.
