Should I raise rent in line with RPI or CPI?

Should I raise rent in line with RPI or CPI?

11:22 AM, 18th October 2013, About 11 years ago 14

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I have just read the latest survey about rent rises.

We have several properties, but one, a townhouse, is coming up for review. In light of the latest RPI, and CPI which this month are aprox 2.7% and 3.3% respectively I am considering a rent increase.

I was thinking of using these figures as a guide for a natural increase, which in effect is no increase. The rent is currently £860.00 per 4 weeks, and the tenants get most of this in Housing Benefit. I was thinking of raising it to £895.00 as the general costs have risen, and because they are in receipt of benefits the insurance is 50% higher than normal.

What does everyone think and do you have any advice?

Regards

AlanRPI


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Puzzler

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17:28 PM, 19th October 2013, About 11 years ago

Reply to the comment left by "Yvette Newbury " at "19/10/2013 - 15:58":

The trouble is they don't reply, they just leave and they don't usually give a reason.

Mark Alexander - Founder of Property118

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17:34 PM, 19th October 2013, About 11 years ago

I agree, I had that happen a few times early on in mt landlord career. I soon learned that lesson as it cost me money lol

Yvette Newbury

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17:58 PM, 19th October 2013, About 11 years ago

OK, I always find the reason comes out in the conversation we have, or rather with my tenants it tends to go... we want to stay but what will the rent be, to which I reply with the small increase explaining that there is no increase in real terms, it is merely a catch up with inflation and then I usually get OK that's fair and a thank you (for no real increase) or they say they cannot afford an increase and we can then negotiate from there. We have never lost a tenant yet to this as either they want to stay and it's just negotiating the rent or they have already decided they will be vacating. It really seems to depend on who you are renting to and where (mine are in central London).

Theodore Brown Property Management

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13:29 PM, 23rd October 2013, About 11 years ago

We updated our tenancy agreements about 3-4 months ago. One of the changes we made related to rental increases. During our research we found that the UK has begun to align how it measures inflation with the way the rest of the world measures it.

One of the consequences of this is that the CPI is being phased out.

In March this year the ONS has begun calculating a new CPI measure called CPIH which more accurately measures the costs of owning, living in and maintaining a property.

If you're having trouble sleeping one night you might like to read about it here: http://www.ons.gov.uk/ons/guide-method/user-guidance/prices/cpi-and-rpi/introducing-the-new-cpih-measure-of-consumer-price-inflation.pdf

In light of the above, we re-wrote our clause as follows (feel free to cut/paste/modify it and use it yourselves):

"If this Tenancy is continued, extended or run-on as a periodic Tenancy beyond the Term specified in Clause 1.2, the rent will, at the option of the Landlord, increase each year on the anniversary of the end of the Term specified in Clause 1.2, by no more than the average percentage stated for the annual change in the CPIH Index (as calculated by the Office for National Statistics) during the two months prior."

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