Rental concessions, such as a free month's rent, appear to be luring Gen Z out of their parents' basements and back into the rental market, even as the coronavirus pandemic rumbles on.
New Zillow research published this week has found that more Gen Z adults, ages 18 to 25, who had been living with family or friends say they're now renting, and most say they got a better deal on their new rental.
A Zillow survey finds more than a third (34%) of Gen Z renters who moved in the past year say they moved from the home of a family member or friend. That's up from 20% who reported the same in an April survey. The data is consistent with previous Zillow research that found the number of young adults living with parents or grandparents was beginning to fall in September, after rising dramatically in the spring.
As for renters who moved from a previous rental within the past year, a majority aren't saving money. More than half (51%) report paying more than before and 14% report paying the same. Nationwide, typical monthly rent was up 0.9% in September, but lower than last year in seven major metro areas, including Austin and Chicago. Still, 57% of Gen Z renters cite finding a better deal on rent as a reason for their move, suggesting they're trading up.
"What we're seeing is that renters who might have been in a small apartment are instead looking at larger units - maybe a two-bedroom instead of a one-bedroom," said Zillow Premier Agent Kenny Truong, founder of Fast Real Estate in the San Francisco Bay Area. "Some others are moving to a rental with a view or a yard for a similar price."
Nearly half of Gen Z renters (49%) indicated they were motivated to move because their new rental offered promotions or concessions, like a free month of rent, free parking or a reduced security deposit.
Rental concessions climbed from 16% to 30% between January and August. Since then, the share of rentals offering concessions has stabilized at around 34% nationally in October, with notable exceptions. More than half of rental listings in Washington, D.C., Charlotte and San Jose offered some kind of concession in October.
Concessions often add up to big savings for renters. Concessions offered in six large markets (Boston, Chicago, Indianapolis, New York, Philadelphia and Washington, D.C.) amounted to savings equal to two months free rent assuming a year-long lease (16.7%, or 1/6 off total rent). In all 50 of the largest markets, the minimum median savings rate was 8.3% or higher.
"The effective savings rate is what renters would save on their typical housing costs over the course of their lease because of both lower rent prices and concessions," said Zillow economist Joshua Clark. "Those savings could be enough to cover the cost difference between a one-bedroom and a two-bedroom unit. Plus, if these Gen Z renters who moved home retained their jobs through the pandemic, they've likely saved enough to afford a larger or more desirable apartment."