According to a new survey conducted by real estate giant Zillow®, landlords now are nearly twice as likely to offer rent concessions to new applicants as they were earlier this year.
In February, some form of concession was offered by 16% of landlords, while in July that number jumped to over 30%. That compares to 12.5% of landlords who offered concessions in July 2019.
The revelation highlights the impact the pandemic is having on the softening rental market. “Before the pandemic, rent growth was accelerating and the nation was seeing concessions dwindle. That trend reversed sharply after the pandemic hit in February,” says Zillow® economist Joshua Clark. “In a softer rental market, landlords are trying to push the right button to bring renters into their space.”
The most common concession currently offered is weeks or months of free rent, followed by free parking, a gift card, and waiving a deposit or fee.
According to the survey, free rent ranged from two weeks to two months, and comprised over 90% of all rent concessions. Six weeks free rent equates to about an 11.5% annual decrease or $200 per month. Reduced or waived deposits or fees accounted for 9% of concessions, and gift cards represented 6.6%.
Zillow® notes that landlords appear to prefer offering free rent upfront over reducing the annual rent, as that can hinder subsequent rent increases once the market corrects.
A survey of renters taken in April as part of Zillow’s 2020 Consumer Housing Trends Report found that 55% reported receiving at least one concession or perk in their rental agreement, most commonly free parking, a month or more of free rent, and reduced rent.
Rent concessions were almost twice as likely in multifamily properties over single-family. Zillow® concludes that apartment seekers in city centers are more likely to enjoy concessions.
The markets where concessions are most prevalent include Washington D.C., Charlotte, and Austin. These cities saw the number of concessions double in July 2020 over July 2019. The only city in the survey that witnessed a decrease in concessions was Jacksonville.
Other cities, including New York and San Jose, saw a meager increase in concessions, but also recorded decreased rent. “Concessions can often be a leading indicator of a coming price drop in that landlords will often offer them first, before reducing rent. If owners feel concessions are no longer moving the needle, they’ll reduce prices,” Clark adds. “Many landlords prefer to offer a concession rather than cut rent and set a precedent that could linger when the market picks back up.”
Property managers are reporting that concessions are a way to overcome pandemic hardships like the loss of in-person tours, but that concessions alone may not be enough to remain competitive. Some are looking for ways to add value through perks like smart technology.
Zillow’s research shows rents dropping amid a shrinking rental applicant pool sparked by widespread unemployment. July 2020 rent figures show an increase of 1.2% compared to 3.5% in July 2019, while nearly 2.7 million adults moved in with family in March and April.
For more information on this study and other important data, visit Zillow.com.
This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).
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Disclaimer: The information provided in this post is not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.