Landlords are increasingly willing to offer concessions or perks to potential tenants rather than cutting rents as the pandemic is having an impact on the rental market, according to a new Zillow study.
The survey of Zillow listings found that 30.4% of rental listings in the service had concessions, compared with 16.2% of listings in February and 12.5% last July. According to the study, these discounts can range from a monthly rent, free access to a parking space or even a gift card.
The survey shows that landlords are offering perks to attract potential tenants rather than taking more permanent steps like lower rents. “Before the pandemic, concessions had eased earlier this year, which coincided with an acceleration in rental growth. That trend reversed sharply after the February pandemic, ”wrote Zillow Group's economist Joshua Clark. "In a softer rental market, landlords are trying to push the right button to get tenants into their space."
Free rental – with an average of six weeks – is the most common concession. It comprises more than 90% of the offers on offer in the USA. Reduced or waived deposits account for 9.1% of concessions, while gift cards account for 6.6%.
Tenants for multi-family houses and other houses are more likely to receive concessions than tenants for single-family houses: 63% of multi-family tenants said they had at least one concession in an April survey. Fifty-nine percent of tenants in other apartment types said they had at least one advantage compared to just 35 percent of single-family renters.
"This means that the increase in concessions is likely to be most widespread in the apartment buildings common in urban core areas. This is in line with previous research by Zillow which found that urban rents in the suburbs were hit harder than rents during the pandemic," wrote Clark.
Washington, DC rents are the most likely to hit concessions, with 57.5% of Zillow listings showing at least one advantage. Charlotte ranks second with 53% and Austin ranks second with 47.1%.
However, supply is falling in some of the more expensive US markets as rents in these regions fall. In the New York metropolitan area, for example, July rents fell by 2.6 percent compared to the previous year. The concessions rose to 14.9% in April from 8.8% in February, but fell again to 13.8% in July.
“Concessions can often be an early indicator of an imminent drop in prices, which landlords often offer first before lowering the rent. When owners feel that concessions are no longer moving the needle, they lower prices, ”wrote Clark. "Many landlords prefer to offer a concession rather than lowering the rent and setting a precedent that could remain in place once the market revived."