Sticker Shock Coming for Renters Receiving Concessions
The multifamily sector has experienced the effects of an increase in pent-up demand this past year, resulting in higher-than-average asking rents as well as concessions, depending on the type of apartment and its location.
Class A concessions peaked in March at 9.9% and have been falling since, but they remain elevated at 9.2% as of October due to competing new supply entering many local submarkets.
Those renters who have received concessions might find their benefits fleeting in 2022 though. Discounted rent from the concessions is only good for a short period of time (typically anywhere from the first month or so of free rent to discounted rent over the period of the lease).
So, this suggests that there might be a form of “sticker shock” at the end of the lease term for many tenants. That is when the new rent increase will be based on the full amount of the rent, prior to the discount resulting from the concession, according to a report from Fannie Mae, supplemented by data from RealPage.
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