Housing crisis: Are month-to-month leases a good idea in RI's crazy real estate market?

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Month-to-month rents mean flexibility for some, trouble for others

Sandra Bagwell began renting her Pawtucket apartment nearly three years ago, before her building was sold to RentProv Realty and her annual lease was switched to a month-to-month agreement.

For some renters, that means flexibility and freedom, especially for those looking to break into homeownership in a tough housing market. For Bagwell, it meant “walking on eggshells.”   

First, Bagwell learned earlier this year that RentProv was raising her rent from $800 per month to $900, she said. Then, in March, she learned it had suddenly decided not to renew her monthly arrangement, leaving her in need of a new home. She has looked for other housing, having utilized RIHousing’s rent-relief program to stay afloat, but she hasn’t found other options.

“It’s terrible; it’s nerve-wracking,” Bagwell said, adding that “you really can’t find anything because these landlords know that there’s funding from the government; the rent is double the amount.”

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Bobby Oliveira, who has taken up residence in the Extended Stay America hotel in Warwick, has had a different experience.

At the start of the pandemic, he and his partner were considering buying a home. They moved into the hotel thinking, “We’ll go to a place for six months temporarily, we’ll get out, the pandemic will be gone, we’ll go buy our house.”

“If the housing market changed tomorrow, we could make whatever move we want to make, and not be in a fight over money, or months, or any of that stuff,” Oliveira said.

Their plan not having gone as expected, the couple remain at the hotel, preferring it to a traditional rental.

“Out of all the possible opportunities on month-to-month [agreements], this made the most sense, because it’s number one, corporate; number two, it’s tucked into a different financial model; and number three, more flexible.”

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For some, that flexibility may mean financial protection. Patricia Burke of Pawtucket used to enter into monthly agreements and now has an annual lease. However, she is searching for a home, and breaking the lease could mean losing a hefty sum of money.

“So I have to either pay two month’s rent, and probably even lose my security deposit,” she said. “So we’re talking almost $4,000 that I would stand to lose if I broke my lease early to buy a house, which is crazy.”

If she waits until her lease is nearly up, “God only knows if I’m going to find something.”

Risks of month-to-month rentals while waiting to buy a home

At present, it’s unlikely that prospective buyers will find many affordable options. According to the Rhode Island Association of Realtors, the median price of a single-family home in the state hit $375,000 in the first quarter of 2022 – a spike of nearly 14% over last year.

At one point in the quarter, inventory plummeted to less than a month’s supply of homes. A healthy market has six months’ worth.

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While some at-will renters have seen their agreements as an ideal setup while navigating a treacherous market in search of a house, the risks are real: At times, rental rates can suddenly rise by any amount – no law restricts them, though at least 30 days notice is required – and nonrenewal of a monthly agreement can occur for any reason, or none at all.

Brenda Clement, director of affordable housing advocacy group HousingWorks RI at Roger Williams University, said monthly rentals don’t work out as well when the alternatives are scant.

“I think the problem in a tight market is that there’s not a lot of options for them to move to,” Clement said. “Buildings get sold all the time and people have to move, but when there’s no place to move to, or very limited options to move to, that becomes a challenge, particularly for renters who are at the lower end of the spectrum that … already had a huge problem, even before all of this tightening of the market has happened.”

While there is no hard data on how many Rhode Islanders rent month-to-month, Clement said they may be more likely to have lower incomes.

A representative of the Tenant Network, a group of renters helping to organize tenant unions and advocate for tenants’ rights, said the group has seen low-income people who “can’t always afford the rent, so it’s easier for them to stiff the landlord and move on.”   

Tara Boulais, who has been using Section 8 vouchers for 13 years, rented month-to-month before becoming a homeowner in Pawtucket. Boulais said it was common for her to start out on an annual lease, then see it changed to month-to-month after one year, before the agreement was eventually terminated.   

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RentProv principal broker and partner Jeffrey Weinstein described at-will renters as “increasingly the minority.”

“The potential for rent increase is always a major concern for renters in that situation,” he said. “It’s definitely moving in the other direction. We’ve had many renters inquire recently about two-year leases. The rent prices are increasing and they want to be locked in.”

Trish Williams, a landlord of 47 years who rents to tenants on a far smaller scale, offering space in her Smithfield home and a house she owns next door, described monthly agreements as vital to protecting her property. 

Williams recounted an array of issues she had faced with tenants, from a stolen dishwasher to damaged bathroom tiles, and a renter who painted a room without permission.

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For Williams, the benefit of a monthly agreement is “that I can kick them out, that I can get rid of them when they go off the deep end.”

For renters, Clement explained, the pros and cons are a mixed bag.

“The good news with a [yearly] lease is that you have a stable amount, a stable time period, that you know the rent is going to remain at that level during that period of time,” Clement said. “The downside of the lease is that A) you lose [some] of the flexibility, but also, if for some reason costs go down in a market, you may still be tied in at a higher rate and a higher rent [than] you might able to get in other areas, or if you wanted to move to a different unit.”