HAP Contract annual renewal

[Mike Adams]

I purchased a 3 unit building in Stamford, CT last year prior to the pandemic.  The current tenants have lived there for 10+ years, one was north of 15 years.  One tenant pays somewhat market rate now as I raised it from 1k a month to 1.3k a month for a 2 bedroom unit.  The other two are 3 bedroom units paying around 2.2k per month; which isn't bad.  However, both tenants are HAP contracts which renewal annually.  The 1st floor pays electric, but I pay their nat. gas.  The second floor doesn't pay any utilities, and I pay for them all.  During the Fall, Winter and Summer, the utilities run around 150 - 200 a month.  During the winter, due to heat, they jump to around 600 a month.  I've weatherproofed the units and upgraded the thermostats, but the energy bills from December - March are still very pricey.  I have no issues with the 1st floor tenants as they are nice, pay on time and was even open in raising the rent.  However, with the second floor, the utilities are crazy high.  I was originally going to have the tenants move out prior to purchasing, but them the pandemic hit and I kept them since it was guaranteed income from the HAP contracts.  I was going to ask to raise the rent by $60.00 per month this year to help with the utilities. They would probably refuse and they could even stop paying the rent.  Under normal circumstances, one could evict. However, we all know this is not possible now.  The units and building need some work to bring up to date.  The last landlord did nothing for 15+ years.  So far, I've replaced the siding, updated the electric and repaired the roof.  I've also added washer and dryers to each unit for the tenants as well.

Any suggestions?

[Peter Anderson]

@Mike Adams whether to raise the rent on low income tenants during the pandemic is a good question. Fortunately for you, the tenant’s rent and utility expense is fixed at roughly 30% of their income. You are not raising the rent on the tenant unless you go over the payment standard which it doesn’t sound like you are. Section 8 will likely pickup the increase.

I am a broker, investor, and manager living in Stamford. I have property in Springdale and used to work for the Stamford Housing Authority in the Section 8 office. If you ever need help, even on a short term/project basis feel free to send me a message.