Why Do Apartments Raise Rent?

[like_mind]

All the reasons mentioned for raising rental amounts (namely, higher overhead costs) are absolutely true and legitimate. That being said, business people want to maximize profit, so even when overhead costs are flat, most owners will up their rent as high as they can get away with.

[Opin_Yunated]

Demand-pull inflation or cost-push inflation. Take your pick.

[RecentGrad1]

Originally Posted by armourereric

This makes me wonder about what is going in locally: Landlord has big increase on local commercial properties, tenents all leave, building goes into foreclosure for lack of tenants.

Seriously, we have had 4 major commercial buildings representing a major fraction of our little villages "downtown" including a small strip plaza all hit their successful tenants with a big 20-30% rent increase. Immediately, in ALL cases, the tenants just closed up or moved out. Now 6-9 months later the buildings are all in foreclosure. Why was this a better option for the owners?

Here was the first victim:
https://maps.google.com/maps?q=Boule...12,190.17,,0,0

Chef's Hat, an excellent, always crowded Mexican Restaurant, and the lunch spot of choice for the local Border Patrol. The LL raised the rent from $700/mo to $1700/mo, away they went. Went into foreclosure 8 months later, never occupied since.

Next this place:

https://maps.google.com/maps?q=Boule...12,258.29,,0,0

Had a lawyer, dance school, feed store, deli and corner market along with a U-Haul rental. All prosperous. LL doubled rent, within weeks, only the corner market remains (on 10 year lease with pre specified rent increases) Property hit market at $650K, now a year later down to 250K still no action. Why would these, under any circumstances, be a good business decision.

Sounds like they didn't learn from the book of gradual pain. Raising rent 10% each year for 3 years rather than 30% all at once will go over a lot better.

Of course, these are also businesses you're talking about - people get paid to keep costs down and every cost affects the bottom line. For individuals, they may stay put in an apartment just because they're too lazy to move to the cheaper place.

[freemkt]

Two primary reasons, I would think:

Costs tend to go up over time, e.g. a property tends to have higher maintenance costs as it ages, landlord-paid utilities (typically water and sometimes gas) go up, property taxes go up.

When rental vacancy rates fall, rents tend to go up because the increased demand is a signal to landlords.

For multi-unit properties, maximum profit is usually found at some occupancy lower than 100 percent - in a fully-occupied large property, there is usually SOME higher rent that could be charged while increasing profits.