The defaults and foreclosures brought on by the housing crisis of the Great Recession produced economic ripple effects. One of these effects was on the rental housing market, as displaced homeowners were forced to find other lodging. Many entered the rental market – causing an imbalance in rental supply and demand and aggravating a mismatch between the type of available rental housing and the needs of prospective renters.
Many of the most affected areas are urban, as a recent study from Trulia illustrated. In the period from July 2012 through June 2013, average rents in metro areas such as New York, Miami, and Dallas rose by over 5%. The average annual rent increase in the 25 largest metro areas was 3.9%, well above the sub-2% inflation rate over the same period.
By contrast, wages nationwide rose by only 1% in 2013. More people are being squeezed by the combination of higher rent payments and stagnant wage growth – not to mention significant underemployment. If you are in this situation, you will have to find room in an already-stretched budget to cover your rent payments. What can you do?
Assuming you have a household budget (if not, that’s the place to start) and negotiating a raise is not an option, here are some ways to look at compensating for a rent increase.
- Try Negotiation – Landlords are not stereotypically heartless. They have feelings, too – but they are business people first and foremost. Complaints and sob stories probably will not work, but it might work to offer value in return for a discount.
For example, if you have a one-time income surge (such as a tax refund), you can offer to pay several months’ rent in advance in exchange for a discount on that rent. An excellent payment record enhances your chances. Landlords hate to lose dependable renters. Late or missing payments can hurt your credit for years to come. You can check your credit score and read your credit report for free within minutes using Credit Manager by MoneyTips.
You can offer to assist on yard work, repainting chores, and minor repairs in exchange for discounts on rent. Property maintenance can be expensive, and relieving some of that burden may be attractive to a property owner. If you do, be sure the terms are fully understood by both you and your landlord (work quality and expectations as well as discount terms).
Do not take on a project so large that liability issues are a concern. For example, unless you are a licensed electrician, agreeing to rewire a house is a bad idea. Even if you are licensed, that leaves you open to liability concerns.
- Look for Alternatives – There may not be acceptable housing alternatives to you, but it cannot hurt to look. You may find better deals – and if your situation is dire, you may want to consider downsizing on a short-term basis.
Understanding the overall rental market is also key for the negotiations above. This gives you some idea of the practical level of discount you can achieve.
- Review Needs Vs. Wants – Be honest with yourself – do you need cable TV? Is your cell phone plan excessive? There may be another level of expenses you really do not want to give up that do not meet the criteria of a true need.
In many metro areas, the economy is beginning to improve, the supply of rental units is increasing, and home buying is becoming an attractive option for an increasing number of current renters. All of this means the rental supply situation should improve relatively soon and pressure rental prices down – but in the meantime, we hope that the advice above can help you deal with short-term rental concerns. MoneyTips is happy to help you get free mortgage quotes from top lenders.