Rent Increases - To be or not to be?

As a property owner in Santa Monica, California, this is the time of year when we get our annual notification of the City's maximum allowable rent increases to our tenants.

This year the City has allowed an increase of 2.7% for tenants who have been occupying a unit for at least 1 year and the term of their lease has expired or reached a month-to-month status.

And while these increases, if only at marginal amounts, are welcomed by landlords who seek positive cash flow and further relief from their massive mortgage payments, the dilemma lies in who deserves a rent increase.

Does the good tenant who pays his rent on time, takes great care of the property and calls whenever there is a problem warrant a rent increase if his unit is below market value?

And with soaring gas and food prices, inflation knocking on our doorstep and an economy that is screaming RECESSION, who bears the grunt of the financial responsibility...the Landlord who relies on rents to satisfy his payments or the good Tenant?

Well if you ask the City of Santa Monica, their answer is clear: It's the wealthy, property owning Landlord vs. the unfortunate Tenant.

So what's the solution?

It's hard not to take into account market forces of supply and demand in situations like this. If a unit is being rented out below market value and the terms of the lease have expired, there is no logical reasoning why the rents shouldn't be justifiably increased to reflect the current conditions.

Furthermore, with the current and unforseeable trend in higher gas prices, there is an increasing demand for rental units in the Westside. And if an extra $50 a month is an insurmountable expense for a tenant, then there are others waiting for their departure.

But for the landlord with the great tenants, the answer is simple.

You give all tenants their maximum allowable rent increase in compliance with the City's law but if they truly deserve that money back, give them a refund during the holiday season with a note saying, "Thanks for being such a great tenant."