From a month of free rent and flexible lease terms, to waived application fees and flat screen TVs, landlords and property managers are turning to an array of perks and incentives to attract new leasing activity and retain existing tenants.
Rent perks offer landlords a dynamic tool to maintain a competitive edge amid oversupply or lackluster market conditions, bolster their brand and help foster healthy landlord-tenant relationships, without cutting into earnings. And for renters, perks can mean significant savings and cater to a host of rental needs.
The practice of rental perks isn’t new, but it has become more pervasive, especially in U.S. metros witnessing sharper than average rent declines, oversaturation and low demand. The tactic is helping create a rental landscape in which landlords are increasingly amenable to finding a comfortable middleground with tenants while also helping make a vacant unit competitive.
A growing solution to a shrinking problem
The national median price of an apartment was at $1,978, according to Rent.com’s November 2023 Rent Report. Concession rates vary throughout the U.S., and geography plays an important factor in determining how generous they may be. Nationally, concession packages offered to renters were up 81.3% last month, according to ALN Apartment Data.
In boomtown Austin, TX, where rents witnessed the steepest national decline at over 10 percent year over year, concessions have surged by 136.2 percent. The city’s boundless growth and ensuing construction boom was stymied by the Covid-19 pandemic, which caused supply chain disruptions and a bottlenecked housing inventory which is now hitting the market at once.
Rental professionals in the Austin market told Rent. that in light of the housing surplus, the practice of offering rent concessions packages, which can come in the form of discounts, adjustments and special offers, is becoming an increasingly prevalent strategy to win over prospective renters.
“Concessions have been a common lever that operators use to fill vacancies. Owners and management companies can pull these levers out of necessity, based on market conditions,” said Alvino Rosales, Senior District Sales Manager for Rent.com’s Austin metro area.
Amid the oversupply in Austin, Rosales said management companies and landlords are extending an array of enticements to tenants in order to maintain a competitive edge and fill vacancies.
“They vary from waiving application fees, to giving up to two months free for a 12 month lease. There have even been some incentives where you get a gift card or flatscreen TV,” said Rosales.
The advantages to landlords are clear cut. When mapping out the 12-month financial performance of a rental property, offering perks can help mitigate costly vacancies and apartment turnover costs, enticing both new renters and existing tenants considering lease renewals.
“For the renter, the incentive is there. If you can get a month off of rent, that alleviates a lot of financial burden I think the average person is feeling day to day,” said Rosales. “So, if you’re able to save that in a year, that’s a big win for your average consumer.”
In essence, renters want to feel the financial returns on their monthly rent investment. That may come as a financial reward or a more personalized perk. Each renter’s needs are different. Some might prefer free parking over a waived security deposit. Others might place value in flexible lease terms rather than a first month free.
No single concession for every renter
The most common concessions offered to renters typically come in the form of financial incentives. Offering a month, and in some cases, up to two months of free rent can have a substantial impact on a new renter’s decision to sign a lease or encourage a loyal tenant to renew theirs. Waiving application fees and security deposits can also be deal breakers for prospective renters. Offering resident referral discounts is another unique way rental property professionals can market available units, attracting prospective tenants.
As each renter’s housing timeframes are different, lease perks are another strategy offered by landlords and property management companies. Longer lease terms can benefit the renter and landlord alike, helping reduce tenant turnover and establish a guaranteed rental rate. Conversely, offering renters the option of short term leases – ideal for students, contract workers, digital nomads, and those simply in need of transitional housing – has potential to draw in a broader cross section of renters with unique timelines.
In the realm of personalized concessions, the possibilities are as broad as a landlord’s creativity. Incentivizing renters with gym memberships, free yoga classes, dog walking services, grocery delivery services and subscriptions to streaming sites are trending perks being offered by landlords to new and existing tenants.
With hybrid and fully remote work now a facet of daily life, offering connectivity, which can range from high speed internet, connected communal work spaces and more, is another increasingly competitive perk, especially for a professional class of remote workers. Additional tech-driven incentives like online pay portals for tenants to submit maintenance requests and pay monthly rent can help renters keep financially organized and provide easy access to payment history.
Security is a safe bet for landlords and tenants as well. Comfort and a sense of safety are universal priorities for renters. To that end, incorporating features such as security systems, complimentary parking and storage units can be compelling incentives to win over prospective renters.
More work on the horizon
While rental concessions are an important factor for a gamut of markets and renters, it is important to note that they are not a silver bullet to guarantee a perfect landlord-tenant relationship. They can even come with certain drawbacks and inherent risks. Unforeseen events such as a tenant vacating an apartment without notice, damage to a unit or failure to pay rent on time can counteract intended gains from rental concessions. Rent perks often fluctuate with market conditions, and so landlords and tenants alike are wise to maintain an open dialogue about expectations and potential phaseouts of rental concessions.
With that caveat, creative and personalized perks, alongside brass tacks financial incentives, can serve as a way to hedge against costly vacancies for a landlord, and win over tenants who have a plethora of housing options to choose from.
