Rental concessions are nearly twice as common as they were in February as the market has softened since the COVID-19 pandemic began, according to Zillow.
The share of Zillow rental listings that advertises a concession—such as free months’ rent or parking, a gift card, or a waived deposit fee has increased from 16.2% in February to 30.4% in July. In July 2019, only 12.5% of rental listings advertised concessions.
Of the six types of concessions tracked by Zillow, free rent has been the most common. Ranging from two weeks to two months, it made up 90.8% of all promotions offered across the nation and ranked as the top concession choice in all but six of the 50 largest markets. Reduced or waived deposits at 9.1% and gift cards at 6.6% followed. The median amount of free rent offered is six weeks or an 11.5% annual discount. For a typical rental, this would mean about $200 in monthly savings.
According to the company, landlords appear to be offering concessions rather than reducing rent to entice prospective renters to their communities as demand has slowed since the pandemic’s onset.
“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 softer rental market, landlords are trying to push the right button to bring renters into their space.”
Renters in multifamily and other home types are more likely to receive a concession than those residing in single-family rentals; 63% of multifamily renters and 59% of renters in other home types reported getting at least one, while only 35% of single-family renters received a concession.
Zillow shares that renters will most often find concessions in Washington, D.C., with 57.5% of listings advertising at least one in July, followed by Charlotte, N.C. (53%), and Austin, Texas (47.1%), with the next highest shares. The year-over-year concessions in these markets are up significantly, with the share of concessions at 27.4% in Washington, D.C., 29.4% in Charlotte, and 15.3% in Austin in 2019. The only metro that saw concessions decrease since February is Jacksonville, Fla., down 0.8 percentage points.
In addition, concessions have flattened in some of the pricier markets, where rents are on the decline. Year over year, July rents were down in New York (-2.6%) and San Jose, Calif. (-2.2%). The share of concessions in New York increased from 8.8% in February to 14.9% in April and then decreased slightly to 13.8% in July. San Jose also saw the same trajectory, increasing from 21% in February to 46% in June and then back down to 40.1% 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. If owners feel concessions are no longer moving the needle, they’ll reduce prices,” said Clark. “Many landlords prefer to offer a concession rather than cut rent and set precedent that could linger when the market picks back up.”
Pegasus Residential, which manages over 35,000 units, has been one of the many multifamily firms to quickly adapt to a virtual leasing environment. Without in-person tours in the site teams’ toolboxes, the property manager has looked for new ways to add value for renters beyond 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 rent,” said Bevan White, vice president of marketing at Pegasus.