New construction surge prompts landlords and
property managers to provide more perks
SEATTLE, Nov. 20,
2023 /PRNewswire/ -- Rental concessions—offers
meant to entice tenants, such as free months of rent or free
parking—are at their highest level in more than two years despite
strong renter demand, Zillow's latest data shows. That's because
property managers are now likely competing for tenants, as new,
primarily upscale buildings from the recent construction boom enter
the rental market.
About 30% of rental listings on Zillow advertised concessions in
October, a surge that signifies a notable shift in the rental
market. Within the past five years, concessions reached a peak in
February 2021, with 36.7% of rentals
offering incentives, coinciding with low renter demand during the
pandemic. Those concessions then dropped as far as 19.4% in
July 2022. However, the current rise
comes as typical rent prices are nearly 30% higher than
pre-pandemic levels, and annual rent growth just ticked back up
after nearly two years of slowing down.
"The pandemic era's increase in concessions was a direct
response to decreased renter demand. Currently, we're witnessing a
different scenario where the demand for rental housing is high, but
there's been a notable rise in supply," said Anushna Prakash, an
economic research data scientist at Zillow. "To differentiate
themselves from newer, potentially more amenity-rich apartment
buildings, property managers are stepping up their game, offering
more incentives to attract potential renters with a broader range
of choices."
Nationwide increase in concessions
Zillow data
shows an astonishing 43 of the nation's largest 50 metropolitan
areas have seen a rise in rental concessions compared to last year.
The most deal sweeteners are found in Salt Lake City, Utah, and San Jose, California, where more than half the
rentals listed on Zillow in October advertised
concessions.
Construction boom and its effects
This trend is
especially pronounced in metro areas experiencing a construction
boom. According to Fannie Mae's Mid-2023 Multifamily
Construction Update, markets such as Washington, D.C., Dallas and Austin are seeing more new developments, with
Dallas and Austin having 74,000 and 66,000 new units,
respectively, either recently completed or underway .
Zillow's data reveals a similar upswing in concessions in those
metros and others, including Phoenix and Atlanta, which are also among the top markets
for new multifamily construction. This correlation highlights how
the influx of new apartments is likely prompting housing providers
to offer incentives to attract renters.
10 Metro Areas with the Largest Share of
Rental Concessions
Metro
|
Share of Rentals
w/Concessions
|
Year over Year
(YoY) Change in
Share of
Concessions
|
Typical Rent in
Zillow Observed
Rent Index (ZORI)
|
YoY Change in
ZORI
|
Salt Lake City,
UT
|
54.4 %
|
26.5 %
|
$1,677
|
0.7 %
|
San Jose, CA
|
50.8 %
|
6.3 %
|
$3,260
|
0.2 %
|
Washington,
DC
|
49.6 %
|
-1.2 %
|
$2,308
|
3.9 %
|
Charlotte,
NC
|
47.6 %
|
20.5 %
|
$1,826
|
2.4 %
|
Minneapolis,
MN
|
46.8 %
|
3.4 %
|
$1,647
|
2.7 %
|
Dallas, TX
|
45.9 %
|
17.4 %
|
$1,803
|
0.6 %
|
Phoenix, AZ
|
45.1 %
|
10.1 %
|
$1,902
|
0.6 %
|
Austin, TX
|
44.8 %
|
13.4 %
|
$1,813
|
-2.8 %
|
Nashville,
TN
|
43.8 %
|
8.1 %
|
$1,896
|
0.9 %
|
Atlanta, GA
|
43.5 %
|
15.2 %
|
$1,925
|
0.4 %
|
Source: Zillow data
Diverse concession strategies across
metros
Conversely, metro areas such as New Orleans (9%), Providence (14%), Miami (14%) and New
York (15%) observed the lowest concession rates in October.
This varied landscape suggests that property managers across the
country are exploring different strategies as they gauge the
effectiveness of concessions before potentially adjusting rental
prices.
Zillow's research, echoing the sentiments of economists and
housing experts, highlights the fact that new construction and
zoning reform are pivotal in enhancing housing affordability. The
current trend in concessions, likely fueled by the spike in
multifamily construction, is an interesting twist in the quest for
affordability. It remains to be seen if the rise in concessions
will translate to a significant drop in rent growth.
Zillow provides a clear and user-friendly platform for both
housing providers and renters. Property managers can easily list
concessions for their properties, while renters can find all
available offers under the "Special Offers" tab on participating
building detail pages, enabling them to make well-informed housing
decisions.
About Zillow Group
Zillow Group, Inc.
(NASDAQ: Z and ZG) is
reimagining real estate to make home a reality for more and
more people. As the most visited real estate website in
the United States, Zillow
and its affiliates help people find and get the home they
want by connecting them with digital solutions, great partners, and
easier buying, selling, financing and renting
experiences.
Zillow Group's affiliates, subsidiaries and brands include
Zillow®; Zillow Premier Agent®; Zillow Home Loans℠; Trulia®; Out
East®; StreetEasy®; HotPads®; ShowingTime+℠; and Spruce®.
All marks herein are owned by MFTB Holdco, Inc., a Zillow
affiliate. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS
#10287 (www.nmlsconsumeraccess.org). © 2023 MFTB Holdco, Inc., a
Zillow affiliate.
(ZFIN)
View original content to download
multimedia:https://www.prnewswire.com/news-releases/rent-remains-high-but-more-properties-offer-incentives-301992812.html
SOURCE Zillow