Facing rent freeze dilemma?

Hello, some background the property is based in the London/South East region. Tenants were struggling historically and large arrears built up during covid.

Eventually, the tenants recovered and have been paying rent on time during the past year but made minimal (as in near zero) effort to deal with the arrears until the issue was forced (with hints of “action”) a few months ago. Now rent is paid on time (and has been so during the past year) and a payment plan is in place but passing rent significantly below market.

Obviously, my costs and mortgage have rocketed and profit is now hovering around 0.

Tenants have demanded no rent rise for the next 12 months as they need to be in the area and will find it difficult to move. Moving locally means paying the (higher) market rents.

The tenants cited that they are repaying the arrears plus the current (below market) rent and have already maxed them out. Looking at the living situation, it probably has an element of truth but overall an exaggeration and tenants had refused to disclose financial information.

Tenants upkeep of the property is probably a 5 out of 10. So, required spending ££ on redecorating periodically.

Broad categories of actions – (a) Meet demand (b) meet half way, (c) Issue acceptable rent rise (say, mid single digit £100 pcm) but stay below market (d) Go to near market anyway

Thoughts appreciated. Thank you,

Richard