Raise the rent or not in our duplex where we live? North Jersey

[John Lunias]

Background:

Hi,

I own and live in a two family home where I rent one of the apartments (above mine) out to a small family. The apartment is a renovated 3br, 1 bath in northern NJ with heat and hot water included. Their 2yr lease is almost over and overall they have been pretty good tenants (they are our first ones!). 

When they signed the lease we gave them a $50 discount for a 2yr vs 1yr duration, and managed to have them not pay the brokerage fee (saving them $2150 or a month's rent) when they decided to sign. Flash forward two years later and the lease is about to expire and we're on the fence about raising the rent of not so looking for others with no bias to weigh in. 

Here's why I think we should raise the rent by $20-$70 a month:

-Originally they moved in as a family of three (Father, mother, and small child) but they then moved in their mother without specifically asking for permission (they said she was going to stay awhile). Only real expense is water but she can be annoying as she smokes and goes inside and out often. 

-They refuse to lock the common area doors (front door, and door to basement w/ laundry) - I've asked them a few times. The grandmother and son both smoke and I think they are just lazy to lock doors even when they retire for the evening! I purchased electronic self locks but they were about $200 a pop!

-They sometimes leave the windows open, even if its really cold (20-30F)! This is really annoying. I did tell them about it and they drastically reduced the times they did this but do see them still do it once in a while. They are of Asian descent and I think in their culture they like to have fresh air, especially while cooking which is understandable as their kitchen does not have an outside venting fan. The heat is included in their rent so I see it as my money flying out the window and contradicts something below.

-Our utilities and tax expenses have increased, plus their mom coming adds more water usage but I Imagine its just a few dollars a month.

Here's why I think we should NOT raise the rent:

-They have never missed a rent payment.

-They are decent people overall - quiet with the exception the doors slamming once in a while and heavy footsteps on the stairs (but that's more the fault of uncarpeted stairs). No arguing, yelling - we hardly hear them when upstairs except for an occasional kid crying or mother yelling. 

-We have been friendly and exchanged gifts for their child and ours. 

- They have had to buy a portable A/C unit to cool rooms without wall A/C

-Their living room is cooler because of its high ceiling, 3 outside walls, and radiators that do not heat up as hot due to being in the end of the "line", so they use a radiator heater to supplement heat and have mentioned it is cold (which is true - by why leave windows open then?)

Compromise?

One idea is to offer the same rent (no increase) in exchange for another 2 year lease with an understanding to remedy the above. If they elect to stay for one year, we would increase the rent by $50-$70 as we feel that would indicate they plan to leave soon. They also have use of laundry in our basement at no additional cost. No off-street parking is included. Its a 3 bedroom, 1 bath, upstairs apartment in Northern NJ. 

Is $20-$70 a month worth annoying a mostly decent tenant who can become annoying or have resentment about the rent increase? My worry is they could easily get annoyed which can backfire on our quality of life and become resentful. 

What would you do?