In a recent SingleKey survey, we asked more than 800 tenants if they expected the quality of maintenance to improve when rental prices increased due to market conditions, such as rising interest rates. Many of the survey responses expected increased quality of maintenance.
Should the quality of maintenance improve with rent price?
The effects of rising interest rates can drive up rent. When this occurs, many tenants expect improved maintenance service to align with the higher rent prices.
In our SingleKey survey, 75% of survey respondents said they think that with higher rents, they should receive increased services. Only 25% said they do not expect improved services when rents go up.
Tenants who sign a lease agreement with higher rents reserve certain expectations for improved services. While every landlord must maintain a habitable rental unit and property, including routine maintenance, they may deliver mediocre service even with rent increases.
Landlords must meet fundamental responsibilities, and every tenant’s expectations of a landlord’s responsibilities may be subjective. It’s essential for a property manager to clearly define what their responsibilities are and what the tenant’s responsibilities are in a lease agreement and again in the lease renewal.
Each party is responsible for landlord and tenant maintenance duties in a rental property.
Landlords are generally responsible for seasonal maintenance tasks that include:
- Cleaning gutters
- Snow removal
- Removing ice dams
- Inspecting the HVAC system and repairing it if necessary
Tenants are responsible for testing their smoke alarms and replacing batteries, removing garbage from the rental unit or home, cleaning the living space, and changing light bulbs.
Some state and provincial laws may dictate specific responsibilities. For instance, snow removal is not limited to landlord maintenance in New York. Owners, lessees, tenants, and occupants must clean snow and ice from the sidewalks adjacent to the properties within four hours between 7 a.m. and 5 p.m.
It is essential to stay informed about regional landlord-tenant laws regarding maintenance. If you are a property owner or property manager, ask what the property’s upkeep is worth. While all landlords must keep rentals pest-free and sanitary and generally are responsible for lawn care, there may be other maintenance requests the property manager is willing to take care of.
There are minimum standards for landlord maintenance responsibilities, and whether there are rent hikes or not, all landlords must meet their obligations. The quality of maintenance should always be good, but whether they improve will depend on what agreement the landlord and tenant decide on. Rent increases are not uncommon when it’s time for a rent renewal. Sometimes, what’s happening in the economy can force landlords to implement dramatic rent increases for new renters.
Why do interest rates increase and raise rental prices?
Think of interest rates as the price of money. Interest rates balance the market, and when central banks print money, they lend it to the federal government. Whenever more money is printed, there will be more supply; if nothing else occurs, interest rates are lowered. If the government borrows more money, the demand increases, raising interest rates.
If the money supply goes up, interest rates will likely fall. When the demand for money increases, the interest rates will typically increase. The Federal Reserve will raise interest rates when inflation becomes too high. Mounting inflation indirectly affects interest rates.
When interest rates rise, it can influence other rate market rates to grow, including:
- The rental market prices
- Adjustable mortgage rates
If mortgage rates go up and housing prices increase, people are less likely to buy and will remain renters. When the demand for housing outstrips the supply, rental rates can increase.
How can rising interest rates affect a property owner?
There are pros and cons for property owners when interest rates rise. Some landlords may raise rents to cover the higher costs of property taxes, insurance, maintenance costs, and mounting inflation. If the property owner has a low mortgage rate and is in good financial standing, higher interest rates may not affect them too much.
Reasonable rent increases are expected during rent renewals. Sometimes, what’s happening in the market can affect property managers managing multiple units, so they must increase rent to break even on the expenses of prospective or current tenants. The property manager’s main objective is maintaining a rental income that covers expenses and makes a profit margin.
Some pros and cons of rising interest rates for investors include:
Pros of rising interest rates
- Investors can look for high interest rates in inflation-based government savings bonds
- Social security is indexed to inflation
Cons of rising interest rates
- Borrowing will cost more
- Adjustable-rate loans will increase
FAQ: Do tenants expect rental maintenance to increase as rental prices rise?
Rent hikes are the result of the demand for housing. When there is a demand for affordable housing, and more people are choosing to rent, a higher increase in rent becomes more likely. Other contributing factors to rent spikes are low inventory of homes and inflation.
Every state and province has different laws on rent increase limits. For instance, Texas has no state-wide laws on rent limits. Once the lease is up, a landlord can give a rent increase notice without the confines of a rent increase cap.
In California, there is a 10% total rent increase limit. In Ontario, it is 2.5%. Every property manager must learn the laws in the region where they are operating a rental property before raising the rent.
Generally, landlords are responsible for all major and some minor repairs, including leaks, mold removal, electrical maintenance issues, and major appliance repairs. They must ensure the heating and water are working properly, and they usually handle the lawn care and snow removal. When defining if a landlord or tenant is responsible for specific maintenance issues, ideally, landlords will want to include these terms in the lease agreement.
Our final thoughts
One of the most effective ways to protect yourself from legal trouble and manage your tenants’ expectations is to clearly outline the possibility of a rent increase after the lease has expired in the lease terms. Define which maintenance tasks you will also be responsible for during the tenancy. Vetting potential tenants will help you find the ideal renter and minimize unpaid rent in the future. Get a SingleKey Tenant Report within five minutes to help you find the best tenant for your rental.