How to calculate a rent increase by CPI
No one likes rent increases. As a tenant it's easier to resign yourself to rent rise if you know the increase is based on something tangible such as the Consumer Price Index (CPI), which measures overall inflation.
The landlord can make a better case for higher rents if he calculates a rent increase in line with the CPI. On the other hand, tenants faced with excessive rent hikes may be able to bolster their argument against such rent hikes if the increase significantly exceeds the CPI.
- No one likes rent increases.
- As a tenant it's easier to resign yourself to rent rise if you know the increase is based on something tangible such as the Consumer Price Index (CPI), which measures overall inflation.
Decide on the base period you wish to use to calculate a rent increase by CPI. You could use the previous calendar year, for instance, or the previous 12 months. The Office for National Statistics calculates CPI for the British government and also makes this data available to the public.
Obtain the appropriate CPI rate. Detailed CPI information is available at the ONS Consumer Price Index website (see Resources).
Multiply the annual CPI percentage rate by the current rental rate. For example, suppose you use the previous calendar year and the CPI rate was 3.50 per cent. If the current rent is £520 per month, you would multiply £520 x 3.5 per cent, which equals a rent increase of £18 per month.
- Obtain the appropriate CPI rate.
- If the current rent is £520 per month, you would multiply £520 x 3.5 per cent, which equals a rent increase of £18 per month.
Add the rent increase to the current rent to find the new rental rate. For a £18 increase on a current rent of £520, you end up with a new rate of £538 per month.
- Some national and local regulations place restrictions on rent increases. Landlords should familiarise themselves with the applicable rules for their locality before implementing rent increases. For their part, tenants should take the time to learn their rights under the law pertaining to rental rates.
Based in Atlanta, Georgia, W D Adkins has been writing professionally since 2008. He writes about business, personal finance and careers. Adkins holds master's degrees in history and sociology from Georgia State University. He became a member of the Society of Professional Journalists in 2009.