How Much Can a Landlord Raise Rent?

Though the COVID-19 pandemic will likely go down in history as the cause of many deaths and much political instability, another one of its legacies has been rampant inflation that’s affected more than just energy costs and consumer goods. Rents have ballooned, sometimes doubling overnight. CBS 4 Denver reported how tenants in a Buena Vista, Colorado, apartment complex saw their rents increase exponentially, leading them to consider a class-action lawsuit. Meanwhile, KERO highlighted how Delano, California, is considering adding rent caps above and beyond the 10 percent required by The Golden State. 

Chicago and Illinois-area landlords have much to consider beyond profitability when raising rates. In this article, we will discuss factors landlords should take into consideration when raising rents, how much a landlord can legally raise rents, and state-specific situations when a landlord cannot raise rent. 

What factors landlords should consider when raising rent prices?

When asking, “How much can a landlord raise the rent?”, the first option to consider is market conditions. It is generally within a landlord’s right to price comparably to other similar properties within the geographic proximity. At a bare minimum, this involves collecting local rent data. However, there are many more factors to consider. 

The most important consideration is the constraints of local ordinances and state laws. We will discuss these in greater detail in later sections, but know that any general guidelines are subject first to legal compliance. 

Tenants and property owners alike want to know if a landlord can increase rent after 1 year, and the answer depends on the state of the lease. Specific requirements vary from municipality to municipality, but generally speaking, landlords must adhere to the terms of a lease, which typically guarantees rent cost for 12 months. Month-to-month leases usually allow landlords to raise rents at any time. 

A practical consideration that most landlords must take into account is the reality of increased expenses. Increases in taxes, insurance, repair costs, renovation costs, and miscellaneous fees often get transferred to tenants in the form of raised rent. 

Finally, when thinking about how much can a landlord raise the rent, decision makers must consider a tenant’s ability to pay. Raising one’s rental rates to stay abreast of the broader market can actually end up hurting one’s bottom line. How? When tenants can’t pay, they leave or get evicted, and moving new tenants in always has associated expenses. 

How much can a landlord legally raise rent prices in any given year or month?  

Both the state of Illinois and the city of Chicago have certain rules governing landlord/tenant agreements in general and rent specifically. For example, here are some of the rules required by Illinois: 

• A tenant must pay rent in a timely manner, avoid damaging the unit, avoid disturbing other tenants, and provide notice prior to moving out in order to receive back a security deposit. 
• If there are 25 or more units in a building and a security deposit is held for six months or more, the landlord must pay the tenant interest on the amount.  
• A landlord must provide a written, 10-day notice prior to an eviction. 
• A landlord may only evict a tenant through a court action and cannot discourage entry or residence by changing locks or turning off utilities. 
• A landlord must return a tenant’s deposit within 45 days if there is no damage or must provide you with a list of damages within 30 days. 
• A tenant may pay a delinquent utility bill owed by the landlord and deduct the amount from rent. 
• In a month-to-month lease, a landlord may raise the rent by any amount provided that the tenant has received a 30-day notice of an increase. 

To learn more, read the Landlord and Tenant Rights and Laws fact sheet provided by the Illinois Attorney General. 

Chicago adds several additional requirements: 

• Landlords must provide a receipt for a security deposit, which can be physical or electronic. 
• The landlord must state in writing the federal bank or financial institution where the security deposit is held. 
• Landlords may charge late fees in gradated amounts depending on the total rent charged. 

For more, read the City of Chicago’s Residential Landlord and Tenant Ordinance summary. 

Neither the state nor the city have rent control laws, which provides landlords with a fair amount of freedom regarding what they can charge. Consider the answers to the following questions: 

• How often can a landlord raise rent payments? A landlord may raise rents at the end of a lease or at the end of a month in a month-to-month lease provided notices have been given within a proper time period. 
• Can a landlord raise rent retroactively? No, a landlord cannot raise rent retroactively.  
• Can a landlord increase the security deposit after raising rent? Yes, a landlord can require additional monies after increasing rents. 

When can a landlord not raise rent?  

A landlord cannot raise rent while you are in the middle of a contract period (e.g., a rental agreement). A landlord may not retroactively raise rent. And in a month-to-month arrangement, a landlord may not raise rent until the end of the month has passed. 

Benefits of raising the rent to fair market value  

When landlords raise the rent so that it matches those of the market, a primary benefit is increased revenue, which can be used to: 

• Increase profits 
• Purchase new properties 
• Maintain the property 
• Make additions to the property 

While tenants obviously do not enjoy rent increases, they do prefer the improved property conditions resulting from it. Rent control has its own deleterious effects. How? Few rent controlled properties receive regular maintenance and failing to put money back into the property tends to lead to deterioration. As Swedish economist Assar Lindbeck humorously said, “In many cases rent control appears to be the most efficient technique presently known to destroy a city—except for bombing.” 

How to notify a tenant that the rent will be increased

For both month-to-month and lease-holding tenants, a landlord must inform them of rent increases at least 30 days prior. This means prior to the end of the next month in month-to-month contexts and prior to the end of the lease when dealing with rental contracts. Additionally, this notification must be in writing; simply speaking to a tenant wouldn’t be sufficient. 

How to determine new rent price for your rental

The best way to determine how much you should increase your rent is to learn what comparable properties are renting for. After determining that your tenants could tolerate a rent increase and ensuring compliance with state and local laws, landlords can compile and synthesize applicable rental information. Unfortunately, such info is often not easy to obtain on one’s own, which is why having a real estate professional handy can prove helpful. 

Millennium Properties is just that professional. We have worked throughout the greater Chicagoland area since 1996, and we help investors find all different kinds of commercial properties. We understand the rental market and can help you find the values you need.