How Landlords Can Help Their Tenants Handle High Inflation

A vacuum cleaner sucking up dollar bills, representing the devaluation of money

How Landlords Can Help Their Tenants Handle High Inflation

As a landlord, you should always want the highest amount of effective rent for your properties. This usually means raising rents in step with market increases. Often, inflation and raising the rent lead to tenant turnover, which leads to loss of rent while a property is vacant and additional expenses getting it RentReady.

Inflation in the USA has been fairly low for the last several years—until this year

So, while rents will continue to go up in areas of high rental demand, other areas may experience increasing pressure to keep rents the same. This will also be more prevalent with lower Class properties where tenants are on fixed incomes or have flat wage growth. These tenants will simply not be able to pay higher rents.

Let’s take a closer look at how it works.

How Inflation Affects Rent Amounts

Inflation is caused by the rise in the prices of goods and services over time. This can result in people’s wages not keeping up with the cost of living, making it difficult for them to afford their living expenses, including rent.

For example, let’s say that the inflation rate is 3%. This means that, on average, prices have risen by 3% over the past year. If someone’s salary has only gone up by 2%, their purchasing power has actually decreased. In other words, they can’t buy as much with their money as they could before.

The same is valid for rent. If their rent has gone up by 3%, but a tenant’s income has only increased by 2%, then their rent is effectively higher than before. If this keeps happening year after year, or even month after month, at a certain point the tenant can no longer afford to pay their rent.

In June of 2022, inflation rose at an annual rate of 9.1%, which is staggeringly high. The Dow Jones estimated an increase of only 8.8%, but, as we can see in the chart above, costs for gasoline, groceries, rent and dental care skyrocketed well beyond the forecast.

At this rate, inflation makes it hard for some tenants to keep up. That means landlords have a choice to make, increase rents and deal with turnover or adjust rents taking into account what their tenants can actually afford to pay.

How to Stabilize Rent Amounts

There are a few different ways that landlords can stabilize rent amounts to account for inflation:

  • Simply charge less rent. One simple solution is to simply maintain the rent on your units to keep your tenants. While it lowers a landlord’s gross rent, it may actually be cheaper than losing rent for vacancies and avoiding turnover expenses.
  • Offer rent discounts. Some landlords offer a lower rent amount to tenants who sign a longer lease. This way, tenants will not be hit with a large increase all at once, and they will have the opportunity to spread out their payments over a longer time.
  • Provide benefits and perks. Landlords can also opt to offer other amenities like free parking, internet, or storage space. These amenities can add value for tenants, making it easier for them to justify paying a higher rent amount.
  • Create a payment plan that fits the tenant’s budget. This method involves splitting rent into two payments or offering a discount for tenants who pay their rent on time. Work with tenants to ensure that they can afford rent while still covering the property’s costs.

The bottom line is that landlords need to be aware of how inflation is affecting their tenants and adjust rent accordingly. By taking these steps, landlords can help keep their tenants happy and financially secure, while still being able to cover their own costs.

Help Tenants, Help Yourself

We’ve also seen rising costs and inflation this year. And it’s affecting tenants too which means some of us to need to adjust rent accordingly. By taking these steps, landlords can help keep their tenants happy and financially secure, while still being able to cover their own costs.

Helping tenants in this way also helps landlords stay ahead of the competition, as many other landlords may not be adjusting rent prices to reflect inflation rates. Doing so puts you—who adjusted their rent—in a better position to retain current tenants and attract new ones.

Do you need more help in managing your rentals while inflation is rising?

Give us a call here at Logical Property Management. We’ve dealt with hundreds of investment portfolios over the two decades, and have the experience and knowledge to protect your returns.

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