Apartment landlords are going beyond typical free-rent concessions in the wake of a multifamily construction boom that led to an oversupply in many markets.
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Utilizing Stake, Incento, Piñata and other companies aimed at offering rewards for paying rent and building loyalty, owners are offering 2% cash back and points tenants can redeem for merchandise or gift cards, The Wall Street Journal reported.
More than 2 million renters nationally are earning rewards for making timely rent payments and signing or renewing leases, according to the article.
Apartment construction ramped up shortly after the pandemic began when apartment occupancy and rent growth was high and interest rates and construction costs were low. Construction surged in Sun Belt markets, in particular, as people migrated away from cities like New York and Chicago in droves, favoring cities with warmer weather and lower costs of living.
Multifamily permitting activity in 2021 and 2022 resulted in record-high apartment deliveries, according to a RealPage report. Nearly 440,000 apartment units were completed in the U.S. last year, a 36-year high, according to the report.
Another 670,000 units are expected by the end of 2024, surpassing previous records by about 50%.
As landlords compete to secure tenants, concessions have ramped up. The average concession was equivalent to 5% of annual rent, which is estimated at $21K or $1,750 a month, during the first half of 2024, according to Moody’s data.
But reward programs, similar to those popular for credit cards and travel, are dually beneficial for landlords. They cost very little as the points and prizes are minuscule compared to the price of rent, and they incentivize lease renewals, according to the WSJ.
Piñata, for one, allows renters to earn points to be cashed in for goods and gift cards from retailers like Amazon, CVS, Target and Walmart. Piñata’s renters would make the equivalent of about $125 annually if they pay their rent on time, just .06% of Moody’s estimated annual rent, the WSJ reported.
Piñata also helps landlords decide how much they can raise tenants’ rents by asking renters if they want to renew their leases three months before their expiration date, CEO Lily Liu told the WSJ. If the renter says no, the landlord can try offering a smaller rent increase, she said.
Piñata says about 97% of renters renewed their leases in 2024, most of them at a higher rent.
About a million renters earn points through Incento, but each point is only equivalent to about three cents, Incento co-founder Gerry Wiatrowski said.
“It’s the psychology of points,” Wiatrowski said, according to the WSJ. “The perceived value is higher.”
But renters also see a benefit in earning rewards from something they’d be paying either way.
Joelle Manning rents an apartment in Summit, New Jersey, for $2,575 a month. With Piñata, she earns monthly points equivalent to about $10, or 0.04% of her rent.
“I wouldn’t not rent an apartment if they didn’t participate with Piñata, but it’s definitely somewhat of an incentive to stay,” Manning told the WSJ.
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