Rental concessions can help keep your units occupied in a competitive or challenging market. However, you’ll need to know which concession to use and when to maintain a steady cash flow.
In this article, we’ll explain what a rent concession is and provide common rent concession examples for how and when to use one.
Key takeaways
- Rent concessions are incentives landlords offer to attract or retain tenants, such as rent discounts, free amenities, or covered utilities.
- Common types include lease incentives, move-in perks, utility coverage, or added amenities, all tailored to specific tenant needs and market conditions.
- Concessions can help reduce vacancies, secure long-term tenants, and maintain steady cash flow, especially in challenging economic or seasonal markets.
- It’s important to weigh the short-term cost of concessions against the potential long-term benefits, such as avoiding prolonged vacancies or turnover.
- Overusing concessions can lower the perceived value of a property, strain cash flow, and lead to higher tenant turnover when discounts expire.
What is a rent concession?
A rent concession is an incentive offered by landlords to make rental properties more appealing to tenants. Rent concessions can include discounts on rent, free months, added services, or other incentives.
For example, you may offer a few months free to a new tenant, including free parking when you would ordinarily charge a fee, or cover certain utilities that you wouldn’t normally include in the rent.
Types of rent concessions
While the most common concessions are monetary, there are lots of creative ways you can add value for your tenants without increasing your own costs. Here are some common types of rent concessions:
Lease concessions
About two-thirds (66%) of renters say lease terms, rent amounts, and fees are the top factors for deciding where to live. A lease concession can make their decision easier by offering incentives like a temporary rent discount or a free first month. You could also reduce the security deposit or bend your rules on pets or occupancy limits.
Other lease concessions can include a parking space or storage unit that would normally be leased separately from the main dwelling.
Move-in concessions
When offering rent concessions to attract a new tenant, you may want to consider giving them more favorable move-in terms. For example, you could allow them to move in mid-month or offer a cash bonus to help with their moving costs.
Utility concessions
Rather than making concessions on the rent itself, you can offer additional services tenants usually pay extra for. For example, you could choose to pay their electricity and gas bills, provide free internet service, or cover other bills that would typically go to the tenant.
Amenities concessions
Another concession landlords commonly offer is amenity access. For example, you could provide a free membership to a nearby gym, free laundry, or access to an outdoor space that wouldn’t usually be included (20% of renters consider this an essential amenity).
Why landlords offer rent concessions
There are a number of reasons why landlords may agree to rental concessions. During periods of low occupancy rates or economic downturns, offering concessions can help fill vacancies. When new supply is driving down demand, rent prices generally drop too, giving tenants more options. More multifamily units are hitting the market than at any time in the past 50 years, pushing property managers to compete for renters. A concession on rental fees or other perks can make your property more appealing in a competitive market.
Benefits of rent concessions
Rent concessions can be a win-win for everyone. Here’s a breakdown of common rent concession benefits for landlords and tenants:
| Type of concession | Rent concession example | Landlord benefits | Tenant benefits |
|---|---|---|---|
| Lease concession | Free month’s rent, prorated rent, discounted security deposit | Attracts new tenants | Lowers upfront costs |
| Move-in concession | Cover moving costs (movers, supplies, transportation) | Quickly fills vacancies | Reduces financial barriers |
| Utility concession | Pay utility bills, provide free internet service | Maintains occupancy rates | Saves money for other expenses |
| Amenity concession | Free or discounted amenities (gym membership, parking, outdoor spaces) | Competitive advantage over other rentals | Adds value at no extra cost |
When should landlords offer rent concessions?
Sometimes, offering concession rental discounts or other incentives makes sense when there’s a chance your property could be empty for a while. These are a few common scenarios when rent concessions may be necessary:
New developments
If you’re building a new rental property, offering rent concessions can be a great way to quickly fill multiple vacancies, especially in markets with a surge in supply. This year, rent prices in many Texas cities dropped as more than 100,000 new units were added statewide.
Other than a free month’s rent or waived deposits (which most new buildings will offer), consider concessions that add long-term value for everyone. Negotiate a deal for internet service and pass the discounts on to tenants or provide it for free.
Seasonal demand
Demand for rental properties tends to slow down in the winter. Near the end of 2024, rent prices were down 0.8% month-over-month and 0.6% year-over-year. If you’re trying to rent a unit during this time of year, you’ll likely need to offer concessions. But you won’t be alone — the share of rental listings on Zillow offering concessions reached a record 38.6% in November.
Economic downturns
Cost remains the most critical factor influencing renters’ decisions about where to live, especially during an economic downturn. When tenants have less money available for housing, a break on the rent could mean the difference between whether your rental property is occupied or vacant.
If you’re concerned about affordability after a temporary concession agreement, a lease co-signer may be a good idea. This makes sure rent is covered if your tenant can’t pay. Read our guide on how to add a co-signer to a lease agreement.
Unusual properties
Whether you’re trying to rent out a small studio apartment or a 5-bedroom house, rent concessions can help attract a tenant if the property is unusual in some way. Concessions can also be useful if the property is in a less desirable area, in less-than-ideal condition, or lacks appeal compared to similar rentals.
How are rent concessions structured?
When it comes to rent concessions, you’re free to structure them however you see fit.
Whether you opt for a temporary one-time new lease concession or a permanent one, the key is to strike a balance between the tenant’s needs and your own – and to structure it in a way that will be the most attractive to the tenant while having the least impact on your return on investment.
For example, offering a free month of rent (temporary rent concession) may be a better deal for you and the tenant than reducing the rent on an ongoing basis (permanent rent concession). Consider a small apartment with a monthly rent of $1,000. If you offer one month free, your effective rent is $917 per month. But if you reduce the rent by $100 on an ongoing basis, your effective rent will be $900 per month.
How much to charge for rent calculator tools can help you determine competitive rates while factoring in potential concessions.
Financial impact of rent concessions
Rent concessions aren’t always a losing proposition; they can often help you make more money from your investment property.
When using rent concessions to avoid vacancies, lowering a tenant’s rent by $100 a month will cost $1,200 over the course of the year. But avoiding a 3-month vacancy may be well worth the expense.
In healthier rental markets, this strategy may not make sense. Depending on your local rent control laws, it may be beneficial to turn over a tenant so you can charge higher rent. For example, if you can charge a new tenant $300 more per month, you stand to earn $3,600 more over the course of the year – which could be well worth a month or two of vacancy.
Look at your rental property expenses to see how much a vacancy will cost. This will help you determine whether it’s worth offering a concession for rent.
Negotiating rent concessions
How you negotiate rent concessions depends on the local rental market. In a strong rental market with low vacancy rates, concessions may not be necessary. When the market is soft, however, renters have more bargaining power. Here are some examples of how to navigate rent concessions:
- Advertise rent concessions: Highlighting concessions in your listings tells potential tenants what you’re offering upfront, like reduced rent or waived deposits.
- Consider tenant proposals: A prospective tenant may ask for free parking to sign a lease, while an existing tenant might request a discount for their lease renewal with a rent increase to balance out affordability.
- Offer concessions to close a deal: Offering a free month’s rent if the lease is signed by the end of the week can be particularly effective when you’re having trouble finding a new tenant.
Rent concessions in lease agreements
When it comes to how to write a lease agreement for concessions, it’s best to keep these separate. This makes it easier to change things, ensures that temporary measures stay temporary, and protects your interests if there is a legal dispute.
Here’s what to include in an agreement to a rent concession:
- Date of the agreement
- Address of the property
- Legal names of the landlord and tenant
- Terms and duration of the concession
- Agreement that the lease takes precedence over the concession agreement in case of conflict
- Signatures of the landlord and tenant
For the most part, you’re unlikely to have a legal dispute over an agreement that favors the tenant, but it’s best to take extra steps to protect your interests. Have your legal counsel review the agreement before you present it to the tenant to ensure the contract is enforceable and in compliance with local laws.
Legal considerations for concession agreements
When offering rent concessions, it’s essential to remain compliant with local laws and regulations. Here are some key legal aspects to consider:
- Fair Housing compliance: Ensure rent concessions are offered fairly to all tenants, following Fair Housing Act practices to avoid any claims of discrimination or unfair treatment.
- State and local laws: Understand your jurisdiction’s rules regarding rent concessions. Some cities may limit the type or amount of concessions, especially in areas with rent control or rent stabilization regulations.
- Tax implications: Consult a tax professional to understand how rent concessions may impact your tax reporting. In some cases, discounts or incentives could affect your taxable income or property-related deductions.
As a general rule, you’ll want to keep a record of concessions and rent payments for at least three years. A fillable rent ledger can help with this, or you can use an online rent collection platform like Baselane that saves lease details and automatically tracks payments, deposits them into your account, and issues landlord rent receipts.
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Risks and limitations of rent concessions
If you decide to offer rent concessions, here are a few things to consider:
- Less cash flow: If you’re offering rent discounts to every tenant in your portfolio, you could be compromising your cash flow and overall return on investment.
- Higher turnover: Tenants who rely on concessions for affordability may be more inclined to look for a new place to live at the end of their lease or when concessions run out.
- Reduced value: Overuse of concessions might harm your ability to negotiate higher rents in the future and might be perceived as a negative aspect by potential buyers.
Tips for offering rent concessions
These tips will help you offer concessions that benefit both you and your tenants without compromising your bottom line:
- Research competitors: Understand what discounts or incentives other landlords in your area offer to ensure your concessions are competitive.
- Evaluate tenant needs: Tailor concessions to your audience, like offering students and remote workers free wi-fi or discounted parking for commuters.
- Find the right time: Offer concessions near lease renewal dates or during periods of high vacancy.
- Be transparent: Clearly outline terms and conditions in writing, including the duration and amount of the concession.
- Protect your bottom line: Make sure concessions don’t significantly impact your profits. Focus on financially reliable tenants and limit the duration of discounts.
Bottom line
Whether it’s offering move-in perks, discounted rent, or utility coverage, concessions can be a powerful tool to minimize vacancies and maintain a steady cash flow.
With Baselane, you can streamline the entire rental process—screen tenants, sign leases, and collect rent, all online. Plus, with built-in banking and accounting, you’ll have everything you need to confidently offer concessions while maximizing your returns. Get started for free today!
FAQs
What does concession mean in rent?
The most common rent concession definition is an incentive offered by landlords to attract or retain tenants. There are various types of rental concessions. These can include discounts on rent and security deposits, or other incentives like free utilities or amenities.
What is a lease concession?
A lease concession is a specific type of rent concession tied to the lease agreement. Generally, lease concessions aim to encourage tenants to sign or renew a lease. These may involve a one-time rent concession, meaning a temporary discount, such as a free month of rent. Some lease concessions are ongoing, like waived fees for parking and pets.
What is a concession fee for an apartment?
A concession fee for an apartment typically refers to the cost absorbed by a landlord when offering rent concessions, such as discounted rent or waived fees. While tenants benefit from these incentives, the concession fee represents the landlord’s financial trade-off to attract or retain renters. This is not a direct charge to tenants but rather the cost of offering a competitive incentive.
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