How Do I Calculate CPI Rent Increases?
To calculate CPI rent increases, determine the applicable CPI index and the date the adjust occurs, then calculate the percentage of CPI increase on that date and multiply it by the amount of the rent. Some leases have a minimum and maximum allowable CPI rent increase.
Select the appropriate CPI Index
The rental lease should specify which CPI index to use. Many leases in the United States use the national CPI index, which is a broad index that encompasses cost of living increases for 87 percent of the United States’ metropolitan areas. Some leases use alternative CPI indexes that cover specific regions of the country or particular metropolitan areas.
Determine the date the increase is to take place
The CPI increase is tied to a specific date. In many leases, CPI increases are annual. Some leases require CPI increases every other year or at the time of lease renewal.
Calculate the CPI
CPI is calculated by dividing the current CPI by the base CPI to find the percentage of CPI increase. The percentage of increase is then multiplied by the rent amount. The resulting figure is the amount the rent increase.
Determine if the rent increase is below an increase floor or above an increase ceiling
If the lease states a minimum and maximum amount of CPI increase and the percentage of increase falls outside of this range, then the rent increase is either the minimum or maximum CPI increase permitted by the lease.