U.S. rents are rising more quickly and fewer apartments are sitting empty, but elevated concessions show that many landlords have not yet regained meaningful pricing power.
The typical asking rent increased 2.2% year-over-year to $1,965 in June, according to Zillow. At the same time, 39.7% of rental listings offered a concession, up from 35.2% one year earlier.
The seemingly contradictory trends reflect a rental market beginning to tighten but still digesting the inventory delivered during the recent apartment construction boom. Completions declined further during the second quarter while absorption continued rising, slowing the growth in available units. Existing properties must nevertheless compete with the substantial supply already added in recent years.
Concessions allow landlords to compete for tenants without reducing advertised rents. An owner can offer a free month, waived fees or complimentary parking while preserving the property’s headline rent. As a result, effective rents paid by new tenants may be considerably softer than asking-rent growth suggests.
The national figures also combine sharply different regional conditions. Concessions remain most prevalent in Sun Belt markets that experienced some of the country’s largest construction pipelines.
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