The share of rental listings that advertise some form of rental concessions rose from 16.2 percent in February to 30.4 percent in July, according to a Zillow release about its listings.
More rental concessions are showing up as year-over-year rent growth has slowed from 3.9 percent to 1.2 percent over the same period.
Landlords appear to be choosing to offer concessions rather than reduce rent to entice tenants to their buildings, as demand for rentals has waned since February.
“Before the pandemic, rent growth was accelerating and the nation was seeing concessions dwindle. That trend reversed sharply after the pandemic hit in February,” said Zillow economist Joshua Clark in a release. “In a softer rental market, landlords are trying to push the right button to bring renters into their space.”
Rentals in multifamily buildings have concessions attached more than do other rental types.
- Free weeks of rent is, by far, the most common offer;
- Reduced or waived deposit is second;
- Among the top 50 U.S. metro areas, concessions are most common in Washington, D.C., Charlotte and Austin.
The rate of rental concessions can often be a leading indicator of a coming price drop, because landlords will often concessions first, before reducing rent.
When owners feel concessions are no longer moving the needle, they’ll reduce prices. Many landlords prefer to offer a concession rather than cut rent and set a precedent that could linger when the market picks back up.
Free rent made up 90.8 percent of all promotions offered across the United States, with the amount of rent relief ranging from two weeks to two months. It ranked as the top concession choice in all but six of the 50 largest markets.
Reduced or waived deposits (9.1 percent) and gift cards (6.6 percent) followed. The median amount of free rent offered is six weeks, which equates to an 11.5 percent annual discount. For the typical U.S. rental, that would mean about $200 in monthly savings.
Concessions most common in urban multifamily buildings
Renters in multifamily and other home types are more likely to receive some sort of concession than those in single-family rentals; 63 percent of multifamily renters report getting at least one, as do 59 percent of renters in other home types.
Only 35 percent of single-family renters reported receiving any concessions.
That means the increase in concessions is likely to be most prevalent in the multifamily buildings common in urban cores, which is consistent with previous Zillow research showing urban rents have been hit harder than suburban rents during the pandemic.
One of the biggest challenges for property managers since the beginning of the pandemic has been capturing prospective tenants’ interest in a space without the option of in-person tours, said Bevan White, vice president of marketing at Pegasus Residential, in the release.
“When our teams switched to a virtual leasing environment in late March, they had to adapt quickly, as they couldn’t physically show an apartment home with an in-person tour, one of the major tools we have to build value,” White said.
“Teams have used teaser photos, pre-recorded walk-throughs of amenities, and even personalized recorded messages to capture the renters’ interest before conducting a full virtual tour with the site team.”
Without in-person tours in their toolbox, Pegasus has looked for new ways to add value for tenants beyond offering concessions. “We have slightly increased concessions in some markets, and we have also focused on increasing the availability of smart homes as a way to add value to a unit instead of simply offering free rent,” White said.