A U.S. Bureau of Labor Statistics May 2023 report shows that home shelter, including rent, is the largest contributing factor to overall inflation increase. Over the 12-month period ending in May, shelter costs rose by 8.0%.
Despite the increase in rents, renting is still cheaper than buying. For the most part, inflation is beneficial to landlords because rising housing costs will raise rent and thereby raise gross income. The demand for rental housing increases as people become resistant to high property taxes and mortgage costs.
While landlords face higher energy and maintenance expenses, a rental property is still shielded from the consequences of inflation because rent can be raised to keep pace with the inflation rate. When properly managed, a landlord will be able to recover more than inflation costs and reap a nice profit.
Further, rental property equity goes up with inflation. The loan-to-value of property mortgage debt declines. This means that your mortgage payments are the same while your rental income rises. Not only can a landlord raise rent to keep pace with inflation but even rent controlled properties are subject to inflation driving rent increases.
Determining rent increases depends largely on the local laws governing your property. Assess market value and local regulations to calculate the rent increase your market can bear, and how frequently you can impose rent hikes. Also consider the demand for rentals in your area.
