Will skyrocketing rents create a reputation management crisis for property management companies? This question looms larger by the day as apartment dwellers fork over increasingly steep monthly rents. According to Zumper, the national median price tag on a one-bedroom rental apartment has surged to an all-time high of 12% year-over-year to $1,374. In New York, rents are skyrocketing as much as 40% as COVID-era discounts go by the wayside.
Why Are Rents Soaring?
These factors are playing a big role in driving rents up:
- The housing market is bananas. Demand for homes outpaces supply. The cost of buying a new home is soaring. Would-be homebuyers are turning to rentals when they cannot afford a new home. This causes rents to increase. In addition, some property owners say they are adjusting for the booming housing market, making up for lost income and compensating for the escalating cost of utilities and property taxes.
- People are returning to cities. After fleeing major metropolitan areas such as Miami and New York as COVID-19 took hold, people are moving back. The spike in demand is causing rents to increase, particularly in Miami and New York.
- Pandemic discounts are over. Property managers are taking away rent breaks that they imposed during the height of the pandemic.
There’s no relief in sight. Institutional investors are buying a record share of U.S. houses. That will likely push rents even higher in the coming months, as tenants renew their leases or move to a new place. According to a national survey, 69% of respondents say they expect rent prices to continue to rise at a near-record pace. On average consumers expect rent to increase by 7.1%.
What This Means to Property Management Firms
Property management firms are getting short-term financial gain from rising rents. But they’re also incurring:
- Long-term risks to their reputations. According to our 2021 Property Management Reputation Report, rent increases were causing a spike in negative reviews — and this was before the current surge in rents. The average rating for rent as a review topic decreased when COVID-19 started and has not recovered to pre-COVID levels. According to a Reputation survey with YouGov, rent is the most important factor when people search for an apartment.
- The return of rent controls. In more than a dozen states, rising rents are prompting legislators to consider rent-control measures. The proposals would generally allow landlords to boost monthly rents by no more than 2% to 10%. Cities have usually resisted rent-control laws because they are viewed as hurting housing markets. But municipalities are taking a closer look at instating rent control partly to make the cost of living more bearable for lower-income rentals and also as an economic measure: the cost of shelter accounts for 40% of the core Consumer Price Index, which is the CPI’s biggest component. In a February inflation forecast, economists at the San Francisco Federal Reserve said that rent increases “point to significant upside risks to the overall inflation outlook.”
What Property Managers Should Do
- Be vigilant in monitoring renter sentiment. Make sure your team is prepared to respond to any spike in negative reviews. Also, pay close attention to the nature of negative sentiment. It’s not always the rising costs in rent that creates a negative review. It’s also how property managers communicate rent increases that matters. Communicate rent increases with as much lead time as possible, explain why rents have increased, and employ an empathetic tone.
- Lean into your strengths. According to the 2021 Property Management Reputation Report, the biggest drivers of positive sentiment are customer service, location, and the speed with which an apartment responds to renters’ needs. Provide renters regular updates on how rent income is being invested into better service, including apartment maintenance, and amenities that make the location of an apartment even more appealing.
- Monitor social sentiment. Renters are publicly speaking out on social sites such as Twitter. Monitor real-time feedback — especially comments that mention your company by name. It’s not always necessary to respond to social media content, but social sentiment provides insight into issues at specific locations that may require immediate attention.
For More Information
Read our Property Management Report for a more in-depth examination of how property managers should manage their reputations. Contact Reputation to learn how we can help you manage your entire online reputation with our property management expertise online.