Asset Management > Program Compliance Accounting

 

> Rent Increases > Frequently Asked Questions

 

 

Q:  When can I submit my rent increase? 

A:   Calendar year end properties - The window for submitting a rent increase is October 1st - December 31st.

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.
 

Q:  Are we still allowed to request up to a 7% rent increase?

A:  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 back-to-back 0% COLA adjustments, the owner will be allowed to increase rents by a maximum of 2% in the 2nd year.
 

Note:  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 %?

A:  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?

A:  All rent increase requests are required to be submitted on-line thru MHDC’s on-line system.  Please log on to https://amrs.mhdc.com 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 increase submission?

A:  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.

 

Q:  Do I have to request a rent increase every year?

A:  NoHowever, 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 previous years.

 

Q:   Do I have to implement the full MHDC approved rent increase in any given year?

A:  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?

 UPDATED 10/19/2011

A:  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 prior to submitting an increase to MHDC for approval (posted here).  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.  Note: 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. 

 

Q:   Can I request a rent increase at the same time I submit my budget?

A:  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 December 31st

 

Q:   Is my approved rent increase tied to my approved budget? 

A:  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.

 

Q What are the performance indicators that MHDC looks at when approving, reducing, or denying a rent increase?

A:  The two main performance indicators MHDC looks at when approving rent increases are cash flow and DCR. 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.

 

Q:   How many rent comparables do I need to submit?

A:  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.

 

Q:  Why do I need to submit a rent roll?

A:  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 I appeal MHDC’s rent increase decision?

A:  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? NEW 10-01-11

A: 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?

 

A:  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 viewing?

A:  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? 

A:  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, etc.


 

Q:   Why can I no longer find the Exhibit X: Mid Lease Rent Increase Addendum form?  NEW 11-21-2012

A:  MHDC has removed Exhibit X.  MHDC announced a policy change in July 2012 stating, “beginning January 1, 2013 MHDC will no longer allow tenant leases to include language that allow rents to be increased in the middle of the lease term. After December 31, 2012, the Exhibit X: Mid-lease Rent Increase Lease Addendum will no longer be available for use.” 

 

Q:   When can I expect to receive approval of my rent increase? NEW 11-21-2012

A:  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? NEW 11-21-2012

A:  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 lease.

 

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? NEW 11-21-2012

A:  Yesrents 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:
 

 


 

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