Rental concessions are on the rise even as rent prices remain sky-high, according to a new study.
Thirty percent of rentals advertised on Zillow in October offered concessions of some sort, such as free parking or free months of rent, according to the report. Over the past five years, concessions peaked at 36.7 percent in February of 2021, before falling to a low of 19.4 percent in July 2022.
The new upward trend can likely be attributed to the recent surge in new apartment construction that brought a new wave of rental inventory to the market, forcing property managers to compete more for tenants.
The current rise, however, also comes as typical rent prices are nearly 30 percent higher than pre-pandemic levels and annual rent growth just ticked back up after slowing temporarily.
“The pandemic era’s increase in concessions was a direct response to decreased renter demand. Currently, we’re witnessing a different scenario where the demand for rental housing is high, but there’s been a notable rise in supply,” said Anushna Prakash, an economic research data scientist at Zillow. “To differentiate themselves from newer, potentially more amenity-rich apartment buildings, property managers are stepping up their game, offering more incentives to attract potential renters with a broader range of choices.”
Zillow’s data shows that in cities that have recently experienced a construction upswing, concessions upswings are usually quick to follow. For instance, in Austin, Texas, which has roughly 66,000 new units, 44.8 percent of rentals on the market offered some form of concessions, a 13.4 percent increase from the previous year before those apartments came on the market. In Dallas, where 74,000 new units were added, 45.9 percent of rentals offered concessions, a 17.4 percent increase from 2022.
Forty-three of the nation’s 50 largest cities have seen a rise in rental concessions compared to last year, according to Zillow. The cities with the most concessions were Salt Lake City, where 54.4 percent of rentals offered concessions, followed by San Jose at 50.8 percent and Washington, D.C., at 49.6 percent.
The city with the lowest concession rates was New Orleans with only 9 percent, followed by Miami at 14 percent and New York City at 15 percent.