Maximum rental increase only 5 percent BUT…

Maximum rental increase only 5 percent BUT…

I was guilty of reading just the title

I read this earlier but I was also guilty of not reading the details. When I first read this news about rental increase, it says that current President of the United States, President Biden will call for a limit of 5 percent to the annual rent increase. The reason is because many voters are struggling with high rental and they need help as soon as possible. Actually, if they say they want to cap at 5 percent, it meant that without this cap, the increase could be much higher!

This is the news article in usatoday.com President Joe Biden will announce a new 5% cap on rental increases nationwide, a proposal aimed at stemming inflation-driven housing costs that have not dipped since the pandemic.

Under the new measure, which would require congressional approval, corporate landlords would lose the ability to write off depreciation values from their units if they increase tenants’ rent more than 5%.

“Some corporate landlords are raising rents by more than their costs, expanding their profits at a time when millions of Americans are struggling to cover rent each month to address the high cost of rent,” said Lael Brainard, Biden’s National Economic Council director in a call with reporters.

In places like Las Vegas investors are buying up homes with cash, turning them into rental properties and raising rents, the Biden advisor said. Please do read the full news article here: article in usatoday.com

What did I actually miss which is even more critical?

The article says that this plan will ONLY apply to landlords with over 50 units in their portfolio. Oh… only those with 50 units and this is really a wow for me because it meant that there are the property investors who now own 50 units or higher and earn increasing their rental higher than 5 percent every year, maybe.

The only issue is that any home owner with 49 units or lower is not covered under this planned ceiling and will still be able to increase their rental if the demand for their unit is high. They could force out the current tenant by increasing their rent. Perhaps these individual owners will have less bargaining power than someone with 50 units or higher. These individual owners may be happy with the 5 percent ceiling increase probably?

If I am the owner and I get to increase 5 percent per year, I am happy too

In May, my condo in Tanjung Tokong was renewed and the rental went up by RM100. From RM1,600 per month it’s now RM1,700 per month. This is an increase of around 6.25 percent and it’s above Biden’s ceiling of 5 percent. However, I would be very happy if I could just keep increasing the rental by 5 percent year after year. Calculation for just 5 years of 5 percent per annum increase? Smiling face… me.

RM1,700 x 5% x 5% x 5% x 5% x 5% = RM2,170 per month. Very healthy for me! 🙂 Extra RM470 per month 5 years later is perfectly fine for a home owner like me. In fact if we use rental as a benchmark, it also meant that anyone thinking of buying this property from me would have to pay extra premium yeah. Since they could rent it out higher or they have to pay a higher rental if they were to rent instead.

Don’t worry, there’s no such a cap in Malaysia. It seems that people can still rent a place for a very good price currently. Last but not least, as a conclusion, perhaps there’s a reason why that article above refers to homeowner as a LANDLORD… cheers.

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