What does “going rate” mean?
In the survey many of you said you struggle to understand when and how rents are adjusted. The term “going rate” seems to be particularly confusing. The “going rate” is effectively the average rent in the market, i.e. the rent you should expect to pay irrespective of whom you are renting from. The going rate changes from year to year, and in most years it will rise.
Your rent also increases as a result of the consumer price index. That is the official general price increase from one year to the next, be it rent, the cost of food or other items.
Under the Tenancy Act we may adjust your rent in line with the consumer price index once a year by giving one month’s notice. These are the minor adjustments you’ll see to your rent once every year. In recent years the going rate (i.e. the average market rent) has risen faster than the consumer price index. This means that your rent has not gone up as much as the market would indicate, and you are therefore paying slightly less rent than tenants in similar properties.
This gap between what you are paying and the going rate therefore increases year on year. After three years both the tenant and landlord may request an adjustment of the rent to align it with the going rate, i.e. adjust it to the typical rent for the type of property in question. Such rent adjustments require 6 months’ advance notice. This adjustment is often perceived as a sudden “surge” in rent.
In other words, paying the going rate benefits tenants when consumer prices are rising. Their rent increases will be lower for two years before the rent is adjusted to the going rate in the third year. Although there is a relatively big increase in the third year, you still save money overall. When rents are falling, charging the going rate will benefit the landlord.
Both you and we may request a switch to the going rate under the Tenancy Act.
Do you have questions about your rent and how it is adjusted? Get in touch with us!
Read more about the results of the tenant survey: