A recent boom in apartment construction is flatlining rents and more options for tenants means landlords might need to sweeten the deal.
Throughout the pandemic, rents soared. But things have changed, and landlords and property managers are offering concessions to appeal to occupants—and to keep their apartments from staying empty, according to Zillow. Sweeteners can range from weeks or months of free rent, lowered security deposits, discounted Wifi or parking, and even help moving furniture into a new rental.
More multifamily homes were completed in June than any other month in almost 50 years, and it’s “opening up new options for renters and spreading demand across more homes,” Zillow chief economist Skylar Olsen wrote in a monthly research report. Slightly more than 33% of rental listings on Zillow across the country included a concession last month; a year ago roughly 25% of rental listings offered some sort of concession.
Don’t be fooled, though, rents are still high, although they’re rising more slowly. The typical rent rose less than half a percent in July to $2,070. That’s up more than 3% from last year, but since the beginning of the pandemic, rents have increased upward of 33%. There’s some variation when it comes to single-family versus multifamily rents. Single-family rents increased close to 5% compared to last year and 40% since the beginning of the pandemic. Multifamily rents rose almost 3% from last year and more than 27% since the pandemic.
Still, the latest trend is a boon for renters, but not so much for landlords. And in some regions, it’s particularly acute. In six major metropolitan areas, more than half the rental listings on Zillow are offering a concession: Raleigh, Charlotte, Atlanta, Salt Lake City, Nashville, and Austin. Austin was the only metro where rents fell from the prior month, while Raleigh is contending with one of the highest rental vacancy rates compared to other major metros.
On the other hand, in more competitive metros where there hasn’t been much softening, fewer listings mention concessions. San Jose, Baltimore, Milwaukee, and Pittsburgh, all have smaller shares of rentals offering deals. San Jose, like many other California cities, has a shortfall of homes, so lower rents, higher vacancies, and easing demand typically aren’t problems for landlords there.
Still, all around, the market is nowhere near as hot as it was during the pandemic. But “rather than a reflection of lessening demand, it’s more likely the massive influx of new apartments hitting the market is causing that demand to spread across more listings,” Olsen wrote. “That is a hallmark of a healthier market with a better balance between supply and demand.”
Already, half of all renter households were considered cost-burdened in 2022, meaning they spent more than 30% of their income on housing. That equates to a total of around 22 million American renters, according to the Harvard University’s Joint Center for Housing Studies. Hopefully this can be a step in a less-expensive direction for renters. But what lies ahead depends.
“The question as we look ahead is whether the current status quo of slow rent growth and elevated concessions will continue, or whether rents will actually come down,” Olsen said. “The recent mortgage rate dip could soften rental demand as more households can afford to buy a home. A labor market slowdown could also contribute to falling rents.”