Renters and landlords alike have struggled to make ends meet over the course of the coronavirus pandemic. In order to continue to attract new tenants, some landlords have taken to offering concessions — and according to new data from Zillow, those concessions are on the rise.
The proportion of rental listings on Zillow offering some type of concession increased from 16.2 percent in February to 30.4 percent in July. In contrast, only 12.5 percent of rentals advertised concessions in July 2019.
The most frequent concession offered was weeks or months of free rent, with this offering making up 90.8 percent of all promotions advertised across the U.S. It was also the top concession offered in all but six of the top 50 largest markets. After free rent, reduced or waived security deposits and gift cards were the next most frequent promotions at 9.1 percent and 6.6 percent of all promotions, respectively.
The median amount of free rent offered is six weeks, which translates to a 11.5 percent annual discount, and about $200 in monthly savings for the typical U.S. renter.
“Before the pandemic, rent growth was accelerating and the nation was seeing concessions dwindle,” Zillow economist Joshua Clark said in the report. “That trend reversed sharply after the pandemic hit in February. In a softer rental market, landlords are trying to push the right button to bring renters into their space.”
Back in April, 55 percent of renters reported receiving at least one concession in their rental agreement, according to a survey taken as part of Zillow’s 2020 Consumer Housing Trends Report. At that time, the most frequent concessions were parking (35 percent), at least one month of free rent (34 percent), and a reduced monthly rent price (23 percent).
Overall, renters in multifamily units were more likely to receive concessions, with 63 percent of these renters receiving concessions compared to 59 percent of renters in other types of rental units. Single-family renters, which tend to be located farther out from urban hubs, saw fewer concessions at 35 percent, potentially indicating how suburban areas have been less impacted by the economic effects of the virus.
Cities that most frequently had rentals offering concessions during July included Washington, DC (57.5 percent of listings); Charlotte, North Carolina (53 percent); and Austin, Texas (47.1 percent). Those cities saw significant changes year over over in concessions offered, increasing from 27.4 percent, 29.4 percent and 15.3 percent of all rentals, respectively.
In some of the country’s most expensive markets where rent has seen declines in growth lately, concessions have flattened, which may be a precursor to further rent price drops. In New York and San Jose, for instance, July rents declined year over year by 2.6 and 2.2 percent, respectively. In New York, rent concessions were advertised in 8.8 percent of all rentals in February, increased to 14.9 percent of rentals in April, and then dropped to 13.8 percent of rentals in July. In San Jose, the share of concessions was 21 percent in February, increased to 46 percent in June, and declined to 40.1 percent in July.
“Concessions can often be a leading indicator of a coming price drop in that landlords will often offer them first, before reducing rent,” Clark said. “If 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.”