Here’s hoping you found a nice rental last year and locked in a low rate, one that can stick for, oh, about three years. That’s because — and we’re so sorry to report this — the rental market has once again shifted in favor of landlords, with little sign it’s going to swing back any time soon.

In this month’s rental column, we’ll take a look at why and note areas with the sharpest price increases.

But hang in there, because we’ve also got some fresh ideas on what you as a renter can do to avoid getting sucked into the vortex of spiraling rent hikes. (Hint: Being a model tenant helps.)

What might Charlie Sheen say about landlords? ‘Winning!’
Just a year and a half ago, landlords were itching for tenants. The national rental-vacancy rate sat at a peak of 8%, its highest level in nearly a decade, after the recession drove tenants to move in with family or friends.

By early 2010, however, the national vacancy rate had dropped to 6.2%, according to Reis Inc., a real-estate analytics firm. And it’s expected to hit 5.5% by the end of this year.

For tenants, this is bad news. Landlords are yanking the once-ubiquitous “one month free rent” signs and other offers they’d used to draw tenants. They’re raising the rent.

Effective rent — what you pay after compensating for the value of those incentives — rose 2.36% on average in 2010 and is expected to rise an additional 4.3% by the end of this year.

“We haven’t seen that kind of rent growth that we’re expecting in about 10 years,” says Brad Doremus, an analyst at Reis. “I think it’s pretty reflective of strengthening demand.”

And things get worse. An analysis by Axiometrics, an apartment-research firm, found that rents have jumped in markets where employment has resumed and where it hasn’t, which puts the squeeze on renters at both ends of the economy.

“The apartment market really turned around in 2010,” says Axiometrics President Ron Johnsey, who expects rents to continue to rise through 2013 at a national average of 5% to 7% a year. “In some markets, you’re seeing double-digit increases in rent.”

February article in Multifamily Executive, exalting expected record growth in rental prices, says, “Landlords are firmly in the driver’s seat when it comes to pricing tenants.” Author Chris Wood writes: “And for most apartment operators, the question isn’t how high will rents go, but how high won’t they go?”

So what’s driving this?
Here’s a quick look:

  • Fewer rental properties are available. According to Harvard University’s Joint Center for Housing Studies, the number of available multifamily units declined by an average of 240,000 units per year from 1999 to 2009. The reason is twofold: Fewer new apartment buildings were built in the early 2000s, and the existing stock aged out of use.
  • Foreclosures drove former homeowners into the rental market. According to Harvard’s center, at least 3.9 million Americans who owned homes in 2004 are now renters.
  • People are renting longer. Would-be owners who suspect housing prices aren’t done dropping are waiting out the market. In the meantime, add them to the growing number of renters.
  • People moving for jobs are renting. In areas with recent job growth, newcomers are flooding the rental market.
  • Renters are spreading out again. Those who had doubled up during the recession appear to be returning to their own, private digs as the economy picks up, experts say.
  • Mortgages are hard to come by. Banks’ tough lending standards are adding to the glut of renters. Even people who want to buy can’t.

Where renters are most likely to get stuck with a higher bill
Reis tracks rent prices throughout the country. Below are the areas where rent is expected to rise most this year and the weighted average for asking rent after that increase; weighted average takes into account the number of apartments at a certain rent to approximate a median more closely. Percentages reflect the increase in asking rent from the end of 2010 to the end of this year. The increase in effective rent, which includes the cost of incentives, is typically even greater.

  • San Jose, Calif.: Rent is expected to climb 6.85% in this Silicon Valley hub, to $1,635.
  • New York: The forecast is for an increase of 6% in asking rent, to $3,038.
  • Washington, D.C.: Rents in the nation’s capital should rise 5.4%, to $1,521.
  • Greenville, S.C.: Here, where job growth is strong, rents are expected to rise 5% to $677.
  • Suburban Virginia: The areas outside D.C. approximate to the capital should expect a 4.9% increase to $1,561.
  • Portland, Ore.: This trendy town in the Pacific Northwest, which shouldered some of the biggest unemployment numbers in this recession, should see rents rise 4.8% to $879.
  • Suburban Maryland: Rents here are expected to rise 4.7% to $1,364.
  • Chattanooga, Tenn.: The site of a new Volkswagen plant and office should bring workers — and rental-price increases of 4.7% to $659.
  • Orange County, Calif.: Even the county that suffered some of the greatest foreclosure losses is seeing a recovery in the apartment market, with rents expected to rise 4.6% to $1,586.
  • Houston: As healthy job growth attracts new residents, rental prices should rise 4.4%, to $822.

What’s a renter to do?
The news appears even grimmer when you consider that rents have already been rising faster than income for years.

But on a positive note, there are steps you can take to stave off steeper rent.

1. Know your landlord’s competition: One popular piece of advice is to become very, very familiar with the market — essentially, “look harder.” Network through friends, drive neighborhoods, ask about a sale property that’s languishing on the market, and check out all the websites, such as HotPads, Cazoodle and Craigslist.

2. Don’t be a high-drama tenant: Oft-forgotten is that you should think like a landlord. Raising the monthly rent isn’t the only way that landlords maximize their income. They need to minimize expenses, too. That means keeping a unit from sitting empty even for a month. And it means finding renters who not only pay their bills but also don’t call maintenance every other week with some kind of problem or complaint.

“If stuff is broken, absolutely, tell the landlord immediately,” says Dennis Fassett, a Detroit landlord and owner of Michigan Property Solutions.

Beyond that, though, leave the landlord alone, and the landlord will be keen to do the same for you, meaning no rental increase.

“If I don’t hear from them all year and they’re paying their rent on time, geez-oh-Pete, I don’t raise their rent,” Fassett says. “I am more than happy not to raise their rent.”

Even in a big complex, management may recognize good behavior. But you’ll likely have to ask for it.

3. Don’t roll over: Axiometrics’ Johnsey says to not accept a price increase automatically when you’re notified of one. Instead, make an appointment to meet with management in person. Do your homework to see what other apartments are charging. See if your landlords will lower the rate with an extended lease.

“There’s a bunch of costs they’ll incur by not renewing you, so be aggressive,” Johnsey says. “Say, ‘I’ve paid on time, I’ve been loyal, I can pay some increase but not that much. Let’s see if we can work something out.'”

By Karen Aho of MSN Real Estate

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