Rental Season is Over, How'd We Fare?

Historically, apartment rental turnover is at its peak throughout the summer up until the city’s busiest move in day—September 1st.   During the recent tough economic times and a flailing nationwide housing market, the seasonality and influx of college students created20 a relatively stable volume of apartment rentals; however, it did affect the price tags.

MLS (Multiple Listing Service) data will have you believe that the average monthly rental price from 6/1/2009 to 9/1/2009 was $2,293, which is the same as the amount paid during the same period in 2008. What is neglected to be told in this data, besides the fact that it covers such a small percentage of the overall rental market, is that in many cases, landlords have been picking up some, or all, of the tab for brokerage fees.  Broker fees generally cost the landlord or tenant (or a combination of both) one month’s rent paid upfront at the time of lease signing.  In 2008, and even more so in 2007, I saw more tenants picking up the bill over landlords–however having seen it first hand–this year’s rental season was dominated by negotiation and landlords paying or splitting broker fees.  With broker fees typically amounting to as much as one month’s rent, the indirect result would raise average 2008 rents to roughly $2,500, making 2009 numbers look far less stable.  However, a difference of roughly $200 per month is unfortunately not the only issue that landlords have negotiated on.

Over recent months, landlords have taken fewer security deposits and/or last month’s rent, as well as offered more concessions, and they still saw their properties sit on the rental market for roughly 12 days longer than last year.  The first point is an obvious one. With unemployment so high and our national savings rate increasing, it’s no wonder that renters are no longer willing to shell out four months of rent upfront. Secondly, concessions have come in a variety of forms, but most recently in the form of free rent for up to two months.  Luxury apartment buildings like the Watermark in Kendall Square and the Atrium by BU are currently using this technique to fill their vacancies in hopes that they will avoid leaving units vacant during the winter when rental turnover really dies down.  Some other forms have included waived amenities fees, including certain utilities, and discounted parking.

With all of these concessions and lowered upfront costs, you’d be surprised that apartments are lingering on the market, however, given that asking rents have hardly changed year over year, it’s clear that there are more behind the scenes negotiations rather than overtly advertised deals. That, and of course, people want to save more money and spend less on housing and retail–and just about anything else–and are willing to settle for that smaller apartment or less expensive pair of shoes in the name of saving. I see this savings trend as a positive for long-term growth, and believe that while it’s the landlords who suffer now (to the renter’s benefit), they will see plenty of upside in rents within upcoming years once we’ve all stockpiled enough of our money. Until then, happy renting!