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The facility marketing manager told us there was remodeling in the immediate future and that Iris will be moved briefly out of her studio during the painting, etc. which did occur. Now after 6 months, the remodel is finished and they are assessing an additional $1,000/month rent due to the remodel. Is this legal??

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Look at the contract she signed upon moving in. In general, Assisted Living Facilities (if that's what this is) have the right to raise rates as they see fit, but it's not done more than once a year. Who's saying this rate increase is being put in effect expressly due to 'remodeling' expenses??? And if so, perhaps the resident was getting a discounted monthly rate while the remodel was going on. Again, you'd have to look at the lease to see what's stated in that contract.
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It will depend on your contract. I have very limited experience with an ALF but I am responding because I was told right Up front that the rate could fluctuate daily on my aunts fee. I thought that was insane. In my aunt’s case it was a temporary placement and an emergency so I was prepared to roll with it. $1,000 sounds obscene but perhaps you went in at a very low rate because the improvements were needed?
I would look for the best place I could find within the budget and be sure to read the contract and ask the hard questions up front. I’m sure I don’t need to remind you of that at this point. Your SIL is very young and might need care for many years. check out group homes. Some of those are really great and are more loyal to their clients.
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SisterinlawBev, when my Dad moved into senior living, he got a discount because it was the middle of winter and the facility had some vacant apartments. As per his Contract, we knew the rate was going to go up.

You may want to check with the facility to see if Iris needed other billable care. I know when my Dad could no longer keep his meds in his apartment [he would forget to take them], then it was recommended to have the Nurse or Med-Tech bring him the pills twice a day. That was an added $900 a month [$30 per day], a service well worth it.
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WOW…our place is a non profit. So far small increases..that seems unreasonable.. I would check with your state.
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I would get out the contract you signed when she moved in. You might also want to have a lawyer look it over. My mom is in a retirement home in Canada. We were told that they could raise the rent annually by a certain percent, I can't remember the percent off the top of my head. What they're proposing in your situation is different and sounds way over the top. Are they charging the other residents too? What renovations are they making? Your mom is paying for a room and services for her care, meals and laundry. She should not have to pay for renovations unless an action on her part resulted in damages to the facility. We have insurance to cover such things. I would not agree to pay this without legal consult. You also need to have a signed agreement. I would watch the bank account to see what they take out. Best of luck to you.
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Set an appointment with an Elder Law Attorney (who can go over the contract) and also ask for assistance in placing her at a new facility. You can call the care advisor on the right side of this page or "A Place for Mom" to see what else is out there.
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Do you have a contract? Re-read it before spending money on an attorney. It should address increases in price. If the contract verbiage allows for sudden increases and you signed the contract then you have no recourse except to break the contract, possibly for a fee, and find another facility. If it isn't addressed in the signed contract, then you can and should fight it.

Edited to add: $1K seems exorbitant in any case!! My parents and I laws have all been in AL or memory care facilities, extremely nice, private ones, and the largest increases we have had have been $150/month. Those increases can only happen once a year upon renewal of the contract.
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SisterinlawBev: You will have to look at your contract. If need be, retain the services of an elder law attorney.
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