Q: When can I submit my rent increase?
A: Calendar year end properties
- The window for submitting a rent increase is October 1st -
Fiscal Year end properties - The window for submitting a rent
increase is the three months prior to the start of the properties
new fiscal year. Example: Rent increase window for a 6/30 fiscal
year would be April 1st – June 30th.
Note: All rent increase submitted outside of the applicable
window will not be processed.
Are we still allowed to request up to a 7%
7% rent increases will be allowed only for properties
that are not senior designated (i.e., properties for residents age
55 and older). Rent increase requests for all senior designated
properties are capped at the lower of the prior year Social Security
Cost Of Living Adjustment (COLA) or the allowed 7% maximum. However,
in years of 0% COLA adjustments, the owner will be allowed to
increase rents by a maximum of 2%.
While 7% is the maximum amount that can be requested, MHDC
encourages rent increase requests to reflect what the management
company thinks the market can support.
Q: The COLA is 2.3%. Does my property’s rent
increase get increased the full 2.3%, or is my property’s rent
increase rounded to the nearest %?
The COLA amount is rounded up or down depending on
the decimal position. A 2.3% COLA equals a 2% rent increase. A 2.5%
COLA would equal a 3% rent increase.
Q: How do I submit my rent increase?
All rent increase requests are required to be
submitted on-line thru MHDC’s on-line system. Please log on
to submit your rent increase. The user name and
password are the same as the user name and password used to access
the budget and financial statement systems. MHDC will not
accept mailed rent increase requests unless your property has
12 units or less.
Q: How do I determine my effective Date for my rent
The effective date needs to be at least one year from
the effective date of your last rent increase as indicated on the
approved Schedule II. The earliest a property can request a rent
increase is one year from when the property’s last building was
place in service.
Example: Property received a rent increase in 2012 effective
July 1, 2012. The earliest a 2013 rent increase may become effective
is July 1, 2013.
Do I have to request a rent increase every
No – However, it is strongly encouraged.
Failure to request a rent increase may cause the property to
experience financial hardship. MHDC will not allow a property to
request an increase that is more than 7% or the Social Security COLA
adjustment % to help make-up for not requesting rent increases in
Do I have to implement the full MHDC
approved rent increase in any given year?
No – However, keep in mind MHDC’s approval process is
based on what the property requests. The property’s request
should be based on what the market can support. Failure to
implement a MHDC approved rent increase may lead to future rent
increase being denied until the property can provide proof that the
market can now support a rent increase.
Q: Does MHDC have a required format for notifying
residents of a rent increase?
Yes - Owner/Management is required to post for public viewing Exhibit A-21 - “Notice to Residents of Management’s Intention to
Submit a Rent Increase Request to MHDC for Approval.” The
notification must be given and posted prior to
submitting an increase to MHDC for approval (posted
A copy of the notice to residents must be included with the
submitted rent increase request to MHDC. This notice may not be
substituted with alternative language.
MHDC may reduce or deny a property’s rent increase, but MHDC will
not increase rents higher than the requested amount.
the requirement is in addition to providing notice to each
resident. Owner/Management may send customized letters to each
resident or use the Exhibit A-21 form. The language on the
customized resident letter must be consistent with the information
on Exhibit A -21. The notice to the residents and the posting of
the Exhibit A-21 at the time of the rent increase submission to MHDC
satisfies MHDC’s 30 day notice rule.
– MHDC receives a request for a rent increase on 11/15/16 for a rent
increase to become effective 1/1/17. MHDC reviews and approves the
request on 12/23/16 with a 1/1/17 effective. The 30 day notice rule
is satisfied as all tenants were to be notified before the request
was submitted to MHDC. MHDC uses the date listed on the Exhibit
A-21 as the official notice date.
Can I request a rent increase at the
same time I submit my budget?
Yes - the rent increase request window is
October 1st – December 31st. To submit
during the budget process, the system will recognize that the
requested amount exceeds your current MHDC approved gross potential
rent amount, and will ask you if you want to submit a rent increase
– yes or no. Answering yes will pull up a rent increase packet with
all the fields that are needed to submit a rent increase. If you
answer no, the system will warn you that no rent increase is
approved and you will need to submit your rent increase on-line by
Is my approved rent increase tied to my
Only properties that have more than a tax credit only
relationship with MHDC (i.e. MHDC or HOME loan) will have their rent
increases tied to an MHDC approved budget. Tax Credit Only
properties are exempt. Since the rents are tied to the budget, it
is imperative that the property submits a realistic, itemized
operating income and expense budget.
What are the performance indicators that
MHDC looks at when approving, reducing, or denying a rent increase?
The two main performance indicators MHDC looks at
when approving rent increases are cash flow and DCR after agreed
upon owner distribution. MHDC considers a healthy property to
maintain a 1.20 DCR. Any budget that projects a property to exceed a
1.20 DCR may have their rent increase reduced or denied. Higher DCRs
may be allowed for properties to achieve their agreed upon owner
distribution and re-pay surplus cash notes and remaining deferred
developer fees. In any event, MHDC will not approve an increase that
is more than 7% or the Social Security COLA adjustment.
How many rent comparables do I need to
Properties must submit Three (3) comparable rents in
the area for each bedroom type. Explanations are required if
three comparable rents cannot be provided. Rents from newspapers
are acceptable. MHDC’s AMRS system also includes the names of other
MHDC properties that are located near the submitting property.
do I need to submit a rent roll?
MHDC reviews the property’s rent roll to verify
current rents and occupancy levels. This information is used to
help MHDC determine if a rent increase is needed. Rent increase may
be denied if MHDC determines a significant number of tenants are not
being charged current rents.
Q: Can low occupancy at my property affect my rent
Yes, a property must maintain occupancy at 90% or greater for three
consecutive months in order for a rent increase to be considered.
If occupancy drops below 90% at the time of review the rent increase
will be denied, but can later be appealed once occupancy is
maintained at 90% for three consecutive months.
Can I appeal MHDC’s rent increase
Yes - A property may appeal MHDC’s
decision to amend or deny a rent increase request. The property
must submit their appeal in writing within 30 days from the date of
the initial decision letter. Appeals must include additional
information for consideration. The appeal process is your
opportunity to provide additional information that you hope would
change the outcome of our decision. Please refer to the
MHDC Rent Increase Appeal Process
section of MHDC’s website for further information.
Q: Who approves my rents if my property has Project
Based Section 8 Units?
Rents are approved by HUD or HUD’s Contract Administrator when the
property has Project Based Section 8 Units. MHDC’s rent increase
policies would only apply to the Non-Project Based Section 8 Units
when a property contains both MHDC financing and partial Project
Based Section 8 Units.
Q: MHDC policy states the Owner/Management is required to post for
public viewing MHDC Exhibit A-21. How long does this notice have to
be posted for public viewing?
MHDC Exhibit A-21 should be posted for public viewing
from the time the rent request is submitted to MHDC until the
earlier of MHDC’s approval of the request or implementation.
Q: Where does the Exhibit A-21 need to be posted for public
MHDC Exhibit A-21 should be posted in common areas that are visible
to its residents i.e. community room, office lobby, laundry room.
Q: The Exhibit A-21 mentions that the Owner/Management shall make
available to its residents the materials submitted for a rent
increase. What information is suppose to be made available to the
residents, if requested?
If requested, the owner/management should make the following
information available for its residents:
· Copy of the rent increase request submitted to MHDC
· Rent Comparable information submitted to MHDC (not
applicable for tax credit only properties)
· Backup supporting the items listed as reason for the
increase in the opening paragraph of Exhibit A-21. i.e. utility
rate increase letter, estimated cost of major repair or initiative,
Q: When can I expect to receive approval of my rent
MHDC reviews rent increases in “proposed” effective
date order. Meaning rent increases with “proposed” effective dates
in January and February will be reviewed before rent increases with
“proposed” effective dates in July and August. In order to allow
MHDC staff adequate time to review and turnaround rent increase
requests, properties with January and February effective dates must
submit their rent increase to MHDC by November 15th and
December 15th respectively; otherwise, the earliest
Schedule II date will be February 1st for requests sent
after November 15th and March 1st for request
sent after December 15th.
Q: I need to offer rental concessions due to soft
market conditions. How should the approved rent and corresponding
rental concessions be reflected in the tenant’s lease?
MHDC recommends that the rent listed on the tenant’s
lease be the most current approved Schedule II rent amount. For
review purposes, this amount will be considered the base rent. It
is recommended that a concession addendum be attached to the lease
when rental concessions are offered. The maximum 7% rent increase
cap will be calculated on the amount reported as base rent in the
Q: I have not fully implemented the rent increase
per the most current approved Schedule II. Can I still increase
rents, and do I need MHDC approval to do so?
rents can be increased in cases where a property has
not fully implemented the previously approved rent increase. The
property will be allowed to increase rents at the lesser of the gap
to get to the previously approved Scheduled II amount or 7% (use
previous year Social Security COLA adjustment if Senior
designated.) MHDC approval is not required since rents are below
the Schedule II rents on file with MHDC. Residents must be given a
30-day notice of the rent increase, and may not receive more than
one rent increase in a 365 day period. See the below example: