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A Rent Increase -- -- Successfully !
by Chrissy Jackson, ACM, PHC

No one enjoys paying more for anything - be it a new car, a hamburger, or their monthly rent. However, rising costs of operation, increasing market value, and a desire for a steady return (profit) all result in rising consume prices.

The inevitability of rent increases is a fact accepted by all renters, at least on a subconscious level. They know that when they rent, the rate is going up at some point. It makes no difference whether they rent land, a manufactured home and land, or an apartment. Rent never goes down.

How you as a community manager or owner handle that increase can determine to some degree how well it is accepted by your residents. Your method of dealing with a potentially unpleasant situation can turn it around and create an opportunity to converse with your residents rather than a volatile encounter where there is tension, anger, and hard feelings.

Here are some strategies you can use to help diffuse a situation when there is a rent increase:

Know the answer to "Why?" You need to know if the increase is due to a rise in operating costs, an increase in the market value of properties in your area, a previously-negotiated increase with your residents, or a scheduled increase due to lease terms. Then, when you know the "why" behind the rent increase, determine what and how you will present it to your residents. What reason will you use? How will you present the increased financial obligation they will be assuming as a positive to them? Are you sold? Are you convinced that the rent increase you are proposing is necessary? Are you sure that it must be in the amount you propose? Is there any research you could or shuold have done before you made this decision? Do you feel strongly enough that you are doing the right thing that you can convince others? Are you prepared to lose a few residents, if necessary, to increase the overall rents?

Is your staff sold? Have you communicated with your staff so they know not only the date and amount of the increase, but also the "why" behind it? And remember, most of the time, what you tell your staff is the same thing they tell the residents. Be sure to take time to carefully present the need for a rental increase to your staff. If you are basing the increase on your recent market survey, their help in compiling it should make this part easier. Make sure then understand and support your decision. A staff member who disagrees will share with the residents (usually) what you tell him to say, but with friends, the true feelings will come out. And, friends tell friends (most of whom will either live in the community or know someone who does. A staff member who does not understand and support your decision to increase the rent can be your worst enemy.

When is the increase planned? If you are increasing rent due to a lease renewal, you might not have a choice in the time of the year it takes effect. Timing the increase can make a difference in the retention rate of current residents. If, for example, your rental rate increase is scheduled to go into effect in May or June, you may lose more residents than normal because the income tax refunds will enable them to move rather than pay the higher rate. And, other communities surrounding you may start incentive programs designed to draw on your residents. Another issue connected with timing is the notice of increase sent to residents. Most states require a certain number of days for rental increase notices. When you plan, look at the calendar and see when the notices would have to be sent. Pay close attention to when residents would be receiving them. If, for example, you want a rent increase to be effective February 1, and you want to give 45 days notice - your residents are going to be receiving notices during the holiday season. That probably is not a good public relations move!

Communicate, communicate, communicate. Not only should you take time to communicate with your staff and send the required legal notice to your residents, you should also plan time to talk with residents. There will always be residents who want to "discuss" the rent increase. Answers provided to residents must be consistent. If the reason for the rent increase is an increase in market value in the surrounding area, don't tell any resident anything different. Being available to your residents -- listening to them - answering their questions as honestly as possible - and turning over those who really want to talk to a higher authority - these four things can avoid a major uprising over a rental increase. Be visible. This is not the time for the Community Manager to hid in the office or to take vacation, or to simply pass all phone calls and rental increase complaints on to the home office! This is the time for the Community Manager to shine in their resident relations skills. Honestly view this as an opportunity to show your residents how you are "building" a better investment for them. If appropriate, create a spread sheet from some of the information you gained during your market survey and show your residents the value of living in your community. Plan improvements. If you have capital improvements in the budget, try to implement some or most of them during the time the residents are receiving the notices for increases, or shortly after the increase takes effect.

Immediate increase for incoming residents. Once the notice goes out to your residents that there will be an increase, your rate of rent quoted to prospective residents should also increase. By doing this, you will also show the residents that the community is worth the rate of rent you want to charge. There will be new residents moving in and paying the higher rate of rent (and happy to be living with you) while your current residents are living through the notice period. This is not only good business and smart financial planning, it is also a good psychological tool. If someone from off the street --who is shopping for a place to live - thinks your community is worth the increased rate of rent, it shows your residents (who may feel differently) the true value of the community.

Finally, remember that rent - to your resident - is a perception of value. A rental increase to your residents immediately starts them on a mental run-through of all the positives and negatives involved with life in your community. A little planning ahead can help insure that these mental exercises are mostly positive! Start four or five months ahead of a planned increase and have a contest. Announce it in your newsletter. Ask each resident to write the things they like best about living in the community. Each thing they write goes on a separate piece of paper and gets put in a box. At the end of the contest - usually 30 days - you have a win-win situation! At least one of them wins something. (You or a staff member draws out the winning ticket(s) and awards a prize.) And you win a lot of things: knowledge of what is important to your residents; a true picture of the perception of the value of your rents to your residents; marketing tools and ideas (if something is of value or of importance to your current residents, it stands to reason that it will be of value or importance to prospective residents), and a first step in your rental increase process. By announcing the contest in one month, beginning it at the first of the next month and running it for 30 days, you have created almost a 60 day window of residents thinking positively about their community. Then, in the third month, announce the winners in the newsletter along with their prizes - and each month list a few of the reasons why residents like living in your community! This positive feedback can go on for several months in the newsletter. A rental increase, a perception of value, a listing of reasons for living in your community - sounds like a list of ingredients for a successful rent increase!

"Chrissy Jackson, ACM, PHC, has been a hands-on Community Manager for over 16 years. She managed communities from 200 sites in size up to over 800 sites. In 1996, she founded Chrissy Jackson Seminars, A Division of Steiner & Associates in Tampa, Florida. Chrissy currently provides property management and sales training to state association conventions and private companies. She is also recognized as a nationally published author with several publications currently on the market.

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