Rental industry pundits are claiming that the downtown Chicago apartment inventory has been overbuilt over the past few years. They are predicting an end to the massive rent increases in the city that have led to calls for rent control and stepped-up efforts to preserve affordable housing. These sorts of predictions happen every year, and they tend to happen towards the end of the year when Chicago’s market is the slowest, so we always recommend taking them with a grain of salt. However, one of the metrics they use to determine the rise and fall of the market is something called “rent concessions,” an interesting and persistent part of the market.
A rent concession is anything that lowers the net (actual) amount a landlord earns from a tenant. But rent concessions don’t always take the form of discounted rent. In recent years landlords have tried all sorts of campaigns to capture the interest of renters, and if downtown really does have a glut of new apartments we’ll be seeing more and more of them over the next few years. Let’s look at some common concessions and decide on the best options for renters.
Special note for Illinois residents: in Illinois any rent concession with monetary value must be included in writing with the lease.
A fresh paint job. A refinished tub. New kitchen shelving. These are some of the cosmetic (appearance only) improvements that a landlord might offer as a concession. Unlike some of the others listed below, these are not considered to have a monetary value and are therefore exempt from the in-writing requirements in Illinois. (Get them in writing anyways!) Cosmetic concessions are self-serving on the part of the landlord, as they don’t really make your apartment any safer, they just make it look better and therefore easier to rerent when you leave. Not to mention that these are things that you can probably do yourself with a minor amount of skill and some spare time. If a landlord offers cosmetic improvements as a concession, we’d take a pass unless looks are the most important thing to you.
Waived Up-Front Fees
Chicago’s strict apartment laws have led landlords of late to replace security deposits with a boatload of smaller fees that tenants must pay up front before move in. Administrative fees, background check fees, parking fees, key fees, pet fees, gym fees. Designed to discourage renters from leaving at the end of their lease, most are non-refundable and when added up they can well exceed one month’s rent. Those few landlords who still accept security deposits might waive them or lower them as a concession. The rest might offer to lop off a few of those up front costs. Given that moving can cost you upwards of three months’ rent, anything to make the process cheaper is certainly a blessing. However, it’s important to do the math. Add up everything that’s being discounted and see if it’s enough to make you commit to a year with that landlord.
Waived Ongoing Fees
Ongoing fees for use of community services is something that’s mostly restricted to larger upscale communities. Services subject to monthly usage costs could include valet parking, party rooms, workout rooms, “pet rent” and credit card fees for online rent payments. Most of these services are opt-in: tenants only pay the fees if they choose to use those particular services. If you plan to use these services on a regular basis, this sort of discount could be really great for you. If you have no reason to use the building’s services, though, it might not be worth it. Free use of your building’s workout room will probably not adequately replace your existing gym membership elsewhere. Free valet parking is pointless if you have no car.
A bigger apartment. One on a higher floor. One with a balcony. All of these things could be considered upgrades. Maybe you’re looking at a studio for 8 months, but the landlord offers you a one bedroom at the same price if you commit to a one year lease. These are common concessions especially in “lease ups” of new buildings, where every unit must be filled, but some are more desirable than others. You might think this is a great deal, but remember that the landlord is benefiting somehow by putting you in an apartment you didn’t ask for. You will wind up heating a bigger place. You might be taking a unit that you’ve not even seen on your tour. That balcony could overlook a construction site. In taking a larger space there’s also Parkinson’s Law of Furniture to consider. Will you wind up with too much furniture when it’s time to downsize again?
Dishwashers, new fridges, in-unit laundry, stainless steel stoves. New appliances are some of the most common concessions that don’t involve actual rent discounts. Landlords like them because they increase the value of the apartment for future rentals. Tenants like them because they make life more convenient. However, the provided appliances may not be of decent quality. Landlords tend to pick up scratch-and-dent appliances or ugly ones designed for industrial use in order to minimize overhead costs. If you opt for an appliance concession, make sure you specify a list of acceptable appliances based on your own research into reviews and prices. Better yet, consider instead asking if you can bring your own appliances and have the maintenance team install them at no cost. That way you can take them with you to your next place when you go.
Free electricity, gas, cable, internet, or all of the above have been seen appearing as rent concessions from time to time. While they may seem like a real bargain at first, they usually come with strings attached. You lose the ability to choose your own providers. Building-sponsored cable and internet can suffer from restricted channels and limited bandwidth. It also inserts an unpredictable middleman. If your landlord turns out to be unresponsive, you may be waiting a long time to resolve power outages or internet outages that might otherwise be quickly resolved with direct calls to customer service. However, if free utilities mean the difference between being able to pay your rent or not, this type of concession is definitely a worth option, provided you’re willing to deal with some sacrifices in convenience and quality.
The rarest of the rare, and a somewhat bizarre choice. The tenant doesn’t really benefit, but the landlord might. For every lease, the management will donate a portion of the proceeds to a charity. But who is choosing the charity, you or them? How much is being donated? Is this really a tax write-off scheme wrapped in the clothes of a humanitarian marketing campaign? Does it really matter if you’re pushing your landlord to help others? If you get to choose from a menu of charities then this is certainly an interesting option. Personally we think it’s better to go with a company that puts money in your pocket and then spend that on a charity that you choose yourself, especially since so many out there can be quite problematic. But it’s certainly a nice gesture and we’re not going to knock any landlord that wants to run this type of campaign.
It may be the first month, the last month or a distributed discount taken off every month. Either way, this is the most common type of concession and our personal favorite. Can’t go wrong with cheaper rent! It’s appealing to pretty much everyone and it’s easy to calculate in the account books on the property management side. Rent discounts allow to lure tenants and seem generous without having to lower the publicized list price for their apartments in later months or years. Anyone checking historical listings for price comparisons – tenants and investors alike – will see the “comps” at the original price. There may also be tax benefits to the landlord for declaring lost income rather than the additional expenses they would incur by offering appliances or a fresh paint job.
Be wary of sticker shock at lease renewal time though, especially if you take the distributed discount. If you’re paying full price for a $1500 apartment and your rent goes up to $1550 that’s annoying, but acceptable. If you’re paying $1375 for a $1500 apartment and your rent goes up to $1550 it may be time to move. Eagle eyed tenants take note, careless landlords sometimes write their “free month’s rent” clause in a sloppy manner that accidentally turn an intended one time discount into one free month every year!
Have you ever rented a place with a rent concession? Which type from our list would interest you the most? Have you ever seen an even stranger concession that we didn’t include on our list? Let us know in the comments and maybe we’ll have a followup list of weird concessions that our readers have seen in the rental market.
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