How to Determine What a Reasonable Rent Increase Is for 2025

Depending on the region you’re property is in, average rents may be rising, while in other cities, they’re dropping.

As a rental property owner, you’re left wondering: What is a reasonable rent increase for 2025?

Determining a reasonable rent increase is essential to maintaining profitability while ensuring tenant retention.

The 2025 rental market presents unique challenges and opportunities, influenced by economic conditions, housing supply shifts, and inflation.

The right rent increase for 2025 depends greatly on where you invest and finding the right balance.

Raising rent too aggressively can drive tenants away while failing to adjust for rising costs can erode profit margins.

In this guide, we’ll explore what you must consider when setting a fair and strategic rent increase for the new year.

Understanding the current rental market

The rental market constantly evolves, and 2025 is no exception. Various factors impact how much landlords might increase rents.

National rent trends

In January 2025, the U.S. median asking rent fell 0.1% year-over-year to $1,599, while month-over-month rents rose 0.5% ($5 increase).

However, regional trends vary significantly due to supply shifts, economic conditions, and job market strength.

• Cincinnati, OH (+15%): A tight rental supply and job growth in logistics and healthcare are driving demand for rental housing.
• Providence, RI (+13.4%): High demand from Boston commuters and limited new housing have pushed rents upward.
• Austin, TX (-16%): A flood of new apartments has outpaced demand, dropping rents.

What this means for landlords

• Markets with strong job growth and low vacancy (e.g., Cincinnati, Louisville, Providence) support higher rent increases.
• Oversupplied cities (e.g., Austin, Tampa, Salt Lake City) may require more conservative rent adjustments.

These regional shifts highlight why landlords should analyze local data rather than relying solely on national trends when determining 2025 rent increases.

Factors influencing rent increases

Before adjusting rents, landlords should consider market forces and economic trends that impact pricing decisions.

1. Housing supply and demand

• Markets with limited housing inventory allow for more significant rent increases.
• Oversupplied markets experience stagnant or declining rents.

2. Inflation and interest rates

• Higher costs of goods and services raise operating expenses.
• Mortgage rates have made homeownership less accessible, boosting rental demand.

3. Employment and wage trends

• Strong job growth supports higher rent adjustments as wages rise in parallel.
• If wages stagnate, tenants may resist large rent hikes.

How to calculate a reasonable rent increase

Determining an appropriate rent increase requires a data-driven approach that factors in operating expenses, market conditions, and tenant retention strategies.

1. Evaluate your operating costs

Rising expenses can cut into profit margins, making rent adjustments necessary.

Operating cost factors include:

• Property taxes: Many cities reassess property values annually, increasing tax bills.
• Insurance premiums: Rates have increased due to inflation and climate risks.
• Maintenance & repairs: Rising labor and material costs can drive up expenses.
• Utilities & services: If landlords cover utilities or maintenance, rate hikes should be factored into rent pricing.

Pro tip: Ensure your rent increase covers inflationary cost increases to prevent diminishing returns.

2. Compare market rates

A rental price analysis helps determine whether your proposed rent increase aligns with current market conditions.

• Review similar listings: Check platforms like Zillow, Rent.com, and Apartments.com for comparable properties.
• Assess occupancy rates: If vacancy rates are high in your area, a modest rent increase may be necessary to retain tenants.
• Survey local landlords: Speaking with other property owners provides insight into regional pricing trends.

3. Set an incremental rent increase

A 4-6% increase may be justified for cities with rising demand, while oversupplied areas should stay under 3% to remain competitive.

• Modest increase (3% to 5%): Best for stable markets with moderate demand
• Higher increase (6% to 7%): Justified in high-demand cities where rental rates are rising quickly

For example, if a tenant pays $1,500 monthly, a 5% increase would raise their rent to $1,575—a manageable jump that aligns with inflation while keeping the unit competitive.

How to research your local rental market

• Check economic reports: City/state websites publish housing and labor reports
• Review rental data sites: Realtor.com, Rent.com, and Apartments.com provide market trends
• Join landlord groups: Real estate investors share pricing insights
• Monitor new developments: More apartments can lower rent prices

Legal and ethical considerations

Landlords must understand legal requirements before implementing a rent increase and communicate changes transparently.

Research local rent control laws

Many cities have rent control policies that limit how much landlords can increase rent.

According to the U.S. Census Bureau, over 48% of renters are considered cost-burdened.

In other words, they’re currently spending more than the recommended 30% of their income on rent.

Landlords operating in regulated markets should review local rent cap policies to ensure compliance.

In cities without rent control, gradual rent increases can help retain tenants while maintaining profitability.

• Annual percentage limits: Some cities, such as Los Angeles and New York City, impose annual caps set by rent boards.
• Just cause eviction laws: In certain states, landlords must provide a valid reason to increase rent or terminate a lease.
• Notification periods: Most states require landlords to provide 30 to 90 days written notice before implementing a rent increase.

The IRS requires landlords to report rental income, though certain expenses—such as maintenance, insurance, and depreciation—may be deductible.

Maintain strong tenant relationships

Keeping good tenants is often more cost-effective than finding new ones.

Consider offering tenants:

• Improved amenities: Upgrading appliances or security features to justify rent increases
• Flexible lease terms: Month-to-month leases at a slightly higher rate appeal to long-term renters
• Clear communication: Explaining rent increases (e.g., property tax hikes) helps tenants accept changes

What is a reasonable rent increase in 2025?

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Whether you’re financing a property or upgrading to justify rent increases, our loans provide quick capital—without bank delays.

Submit your deal with Park Place Finance today and take the next step in scaling your rental investments.