SEATTLE, WA – Rental concessions for Zillow properties are now almost twice as common as they were in February as landlords strive to attract new tenants in a country The rental market has weakened significantly since the outbreak of the coronavirus pandemic.
The percentage of rental listings on Zillow promoting some form of concession rose from 16.2% in February to 30.4% in July. These include discounts such as free monthly rent or parking, offering a gift card, or even waiving a deposit. Only 12.5% of the rentals advertised concessions last July.
Of the six types of concessions in the pursued Zillow's study, week off rental was by far the most common. With a two-week to two-month relief, free rental accounted for 90.8% of all promotions offered in the US and was the first choice for concessions in but six of the 50 largest markets. This was followed by reduced or waived deposits (9.1%) and gift cards (6.6%). The median amount of the free rent offered is six weeks, which corresponds to an annual discount of 11.5%. For typical US rentals, that would mean roughly $ 200 in monthly savings.
Landlords appear to be choosing to offer concessions rather than lowering rents in an attempt to attract tenants to their buildings as demand for rental properties has declined since February.
"Before the pandemic, rental growth accelerated and concessions fell. That trend was strongly reversed after the pandemic in February," said the Zillow economist Joshua Clark. "In a softer rental market, landlords are trying to hit the right button to get tenants into their space."
A survey of tenants conducted in April as part of the Zillow 2020 Consumer Housing Trends Report (1). found that 55% said they had at least one concession or discount in their rental agreement. Among tenants who received at least one concession, parking spaces (35%) or at least one month of free rent (34%) were the most common, followed by a reduced monthly rent (23%).
Tenants in multi-family and other apartment types are more likely to receive a certain concession than tenants in single-family houses: 63% of multi-family tenants say they will receive at least one, as do 59% of tenants in other apartment types. Only 35% of single-family tenants stated that they had received concessions. This means that the increase in concessions in the apartment buildings common in urban cores is probably the most widespread Previous research by Zillow showed that urban rents were hit harder than rents in the suburbs during the pandemic.
Renters most often find discounts in Washington, D.C. – 57.5% of the listings put out at least one type license in July. Charlotte (53%) and Austin (47.1%) had the next highest stocks. These are all dramatic from July 2019if 27.4% of rents in Washington, D.C. were offered with concessions, Charlotte had 29.4% and Austin only 15.3%. The only subway where concessions have been made since February is Jacksonville (minus 0.8 percentage points).
In some of the most expensive markets in the country, where rents are falling, concessions have flattened. The July rents in the metros were falling year after year new York (-2.6%) and San Jose (-2.2%). The percentage of concessions in new York rose from 8.8% in February to 14.9% in April before falling to 13.8% in July. Likewise, the San Jose property increased from 21% in February to 46% in June, and then to 40.1% in July.
"Concessions can often be a leading indicator of an impending price drop, which landlords often offer first before they lower the rent. When owners feel that concessions have stopped moving, they lower prices," said 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."
One of the biggest challenges real estate managers have faced since the pandemic began has been to get potential tenants interested in a space without the option of personal viewing Bevan White, Vice President Marketing at Pegasus Residential.
"When our teams migrated to a virtual leasing environment in late March, they had to adapt quickly because they couldn't physically show an apartment building with a personal tour, one of the most important tools for creating value," said White. "The teams used teaser photos, pre-recorded visits of amenities, and even personalized pre-recorded messages to pique tenant interest before taking a full virtual tour with the site team."
With no personal tours in the toolbox, Pegasus has been looking for new ways to offer tenants added value that goes beyond offering concessions. "In some markets, we've increased concessions slightly, and we've also focused on increasing the availability of smart homes to add value to a unit rather than just offering free rental," said White.
Rents in the US rose 1.2% year over year in July, down from 3.9% in February and 3.5% in July 2019. More tenants than last year have missed payments due to record unemployment, and those can be paid after the extended unemployment benefits rise. A Zillow study in June found that approximately 2.7 million adults in the United States moved in with a parent or grandparent in March and April.