Rent Increases and the Petitioning Residents

I myself have never been in this sort of situation but it seems like you have a protester in your midst someone that took the time to rally up their neighbors and go door to door seeking signatures.

I think the main thing would be to communicate that the increases are not specifically due to the valet trash service, but they are a reflection of what is happening in the market. Supply and Demand basics. I would also communicate to them the efforts that you are taking on their behalf to bit out and pitch the improvements they have requested to the property owners (the cobwebs might be a big ticket item that has to wait LOL).

BTW I LOVE the valet trash idea!

I am in the same river you are in, just not the same boat. I increased rents, implemented a RUBS program and stopped paying for monitored alarm service at one community. It isn't easy to explain to residents the need for the changes, to be sure. I appreciate how awkward this is for you! Please let me know what transpires! (I am blessed with Residents who do understand the necessity of these changes. No one has moved yet because of them - Some threatened :-) But I definitely had to shoulder the weight of multiple passionate pleas for reconsideration. One thing I know is, it is very, very true that all the Residents talk and there is always one person who incites and inflames others.) I am interested to know how this plays out and what your Corporate Office did to assist you.

I would encourage you to not look at this situation as some sort of troublemaker inciting the locals. Taking the situation from a 3rd party point of view, here is how one can easily take the situation: The residents made requests for certain upgrades, and instead of making the upgrades that they requested, a different service was added that increased their rent. Not only that, but this increase was added to already large increases in rents because of market conditions. So in a lot of ways, you are asking your residents to accept a lot right now, so if you see them as troublemakers, it will only make it worse.

If this is an exceptionally big issue with the residents, I would consider "grandfathering" existing residents in on the Valet Waste situation. If you are gaining ancillary income from Valet Waste, you should hopefully be able to afford this until new residents replace older grandfathered residents. Or even halve the cost for existing residents and it would probably work out.

Ok, I'm going to take a different slant and be the devils advocate here. If rents on new move in's can be increased that is excellent. As far as renewal rents, we all know they get amnesia about the great deal they received previously. For some reason they get “puppy memory,” not that I equate our resident to pets. This can easily go from a monetary issue to a psychological issue that increases turnover even further. Adding the valet trash service and associated costs may have exceeded what is commonly known as the "breaking point." I also agree had this been communicated as something other than justifying a service for a cost and just implemented and factored it in requested rents, it probably would have been accepted differently. By saying "we are pleased to provide you with a great service," and not saying anything related to why rents are going up might have diffused the situation.

Each property is also unique related to where this point can be based on services rendered (our perception of service) and services justified (where the resident believes they should be and what value they place on them). You say turnover is 65% and that is normal. While you may increase income by $100 (or less depending on what rents they were at on the last renewal), you may also increase expenses dis-proportionate to the improved revenue. We condition our managers to believe raising rents from increased revenue is the primary objective, when in fact it is only part of the equation. The key to maximizing NOI (not just revenue or income), is the balance of occupancy, rents, and the effect of operating expenses (including turnover costs). If I increase income annually by $800, however, my turnover increases and turnover costs (hard and soft) exceed $1,000, I have netted nothing. Even in bull markets it is easy to exceed $2,000 in turn expenses per unit. Now factor in the capital factor as you may be replacing carpets a year or two sooner because of that turnover and that number can be dis-proportionate to any perceived or realized income. I only say this to make sure during this process you monitor the cost benefit of the action. If all forty of these residents do not renew, it can have a significant impact on your NOI from increased expenses, especially if they were they longer term residents living at your community.

Now for handling the resident issue, I agree with Brent this may be asking a lot and possibly too much in a short period of time. I also like his idea of a Grandfather position to not spike turnover. Remember, we deal with peoples homes, finances, pets, cars, etc., therefore we also deal with their emotions. Timing of things like this and how they are presented can mean the difference between success and failure (or at least not as successful as desired.) Remember, at one time we did not charge for water and sewer and then we started doing it. Managers cried from the roof tops saying our residents would leave...but they did not. Then we started charging for trash and the managers again cried from the rooftops saying our residents will leave...but they did not. This also plays into market conditions and what your competitors are doing. Monitor the market, present it as a service, look at options to prevent a spike in your turnover, and I am sure you will weather this storm just like we have in the many others that came before.

I really enjoyed the path Lawrence took. Great perspective.

I agree with Brent on the promise one thing deliver another point of view. I understand it was not intentional and perhaps the other plans are still in the works, but this little joke should sum it up. During the monologue of the Jimmy Fallon show, he mentioned the announcement of Amazon's new "Kindle Fire" meant to compete with the Ipad. His comment was: just like at Christmas when your parents give you the exact OPPOSITE of what you asked for!

He got a good laugh, but we all had that experience, it was dissapointing and most importantly we all remember it.

How I approach renewals is everyone gets the opportunity to have their apartment look the same as the new moveins - but I also tell them that their rent will then also be the same as the new move ins. That helps a great deal to put it into perspective. However, I also work with tenants when they renew, especially those that have been here a long time, and look at what we can do, some fun stuff is to upgrade things in the kitchen - hi-spout faucets, new hardware for the cabinets, paint the cabinets - we have an eye popping two tone that we do on the cabinets, (cost on all these things is low) or paint a wall, replace carpet in a room (usually living room) or add an appliance they did not have before (a few apartments still don't have a dishwasher) put new vanity lights in the bathroom - $30 or $40 at HD, etc., if we need to replace the stove, spend another $50 and get one of the really nice looking ones with the modern finish. It has worked out great, they feel special (as they should) their apartments look GREAT and they renew. On quite a few items the cost is minimal, a quart of paint and 1 hour of maintenance time, $20 for new cabinet hardware but it's always in keeping with the increase.

Oh, and by the way, I also use this as an opportunity to mention that in many instances if we had to carry the cost of utilities it would be more difficult to do these upgrades as we would have to consider that as part of the apartment cost.

I have a fair amount of residents on fixed incomes who complain about rent increases. I feel for them but our community is for-profit business. The usual complaint is that their income didn't go up, so they can't afford a rent increase and they want us to base our decision on their income.

We are not a tax credit or income based property. We do not accept housing vouchers or section 8.

When residents come to me with their complaints, I sympathetically remind them that we are a conventional property and our rents are based on the market, not income. I offer to help them find an income based property if that is what they need. So far, none of the complainers have moved, so it's seems they just needed to prioritize where they want to live with how much they want to pay.

It seems petty that residents would take up a petition to protest such a small rent increase. I had one resident who tried to rally his neighbors in protest- but it was the complainer who was driven to move out, by his own neighbors. His neighbors refused to join his cause, and several complained to me about him approaching them.

Our rents are higher than many communities nearby, yet our occupancy is also higher. Everyone wants a good deal in this economy, but we businesses need to survive too. The trick is making sure residents believe that your community is a good value. It's not an easy task! I just try to be enthusiastic about what our community has to offer and it rubs off. If management does not believe and act as though their community is of comparable value to the rent charged, it will be difficult to increase rents.

I think I would write a letter to the petitioners explaining the market rates for your area. I wouldn't back down on the increases, because that will just encourage more complaints.

Keep your head up!

Lawrence stated it very well! I believe you must look at the whole picture and not just "raising rents". Small steps usually will lead to BIG things!