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Multifamily Economic and Market Commentary

DECEMBER 2021

Concessions Remain Elevated Despite Spike in Rents

Multifamily market fundamentals have strengthened considerably this year, despite the ongoing challenges 

posed by the COVID-19 pandemic. The rebound in the economy, most especially in job growth, coupled with 

pent-up demand for housing and increased household savings, have led to significant rent increases this year, 

particularly during the spring and summer months. Yet, in many metros there has also been an increase in new 

supply, resulting in an unusual situation of both elevated rents and concession levels.

In a competitive market, concessions are one of the ways property owners attract tenants. Concessions are 

enticements with an economic value for renters, such as periods of free rent, free utilities, or other amenities. As 

seen in the charts below, recent concessions data from RealPage shows that although there are fewer units 

offering concessions than a year ago – down from a high of about 16% of all units in May 2020 to about 7.4% of all 

units in October 2021 – the national concession rate remains at about 8.6%, or slightly more than one month’s 

free rent. 

Source: RealPage

New Supply Impacts Demand – and Concessions

Despite the challenges confronting the construction sector over the past 18 months, including supply chain 

constraints, volatile material prices, and labor shortages, many of the nation’s multifamily markets continue to 

see a surge in the supply of new apartments. So far in 2021, the industry has completed over 280,000 new 

apartment units, with another 150,000-plus units scheduled to complete before the end of the year, according to 

Dodge Data & Analytics. That’s after the industry delivered more than 404,000 units in 2020, despite the delays 

caused by the pandemic.

National monthly multifamily concession rate Percentage of units offering concessions

6%

8%

10%

12%

14%

16%

18%

5.5%

6.0%

6.5%

7.0%

7.5%

8.0%

8.5%

9.0%

9.5%

© 2021 Fannie Mae
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Multifamily Economic and Market Commentary

Concessions Higher in Expensive Markets 

Although approximately 430,000 new apartment units may be completed in 2021, these units are not evenly 

distributed on a national basis. As has been the case for the past several years, much of the new apartment supply is 

concentrated in specific submarkets in approximately 12 metropolitan areas. The most active metros in the country 

for apartment development continue to be New York, Washington, D.C., Dallas, Austin, and Los Angeles. New York has 

more than 74,000 units underway; D.C. has more than 41,000 units underway; and Dallas is at more than 31,000 units. 

Austin, Los Angeles, Seattle, and Phoenix follow with more than 24,000 units each, and Atlanta, Orlando, and Houston 

round out the top 10. 

However, it is not always just competing new supply causing an increase in concessions. As seen in the charts below, 

although Dallas, Orlando, Phoenix, and Houston all have a lot of new supply underway, their concession rates remain 

lower than those in the more expensive metros of New York, San Francisco, Miami, Boston, and Washington, D.C. – all 

of which have much higher asking rent levels, thus necessitating higher concession rates.

Source: RealPage

Multifamily monthly concession rate by market – select metros

4%

7%

10%

13%

Atlanta Boston Chicago Dallas Houston Los Angeles

Concession Rate

Dec-19 Mar-20 Jun-20 Sep-20 Dec-20

Mar-21 Jun-21 Sep-21 Oct-21

4%

7%

10%

13%

Miami New York Orlando Phoenix San Francisco Washington

Concession Rate

Dec-19 Mar-20 Jun-20 Sep-20 Dec-20

Mar-21 Jun-21 Sep-21 Oct-21

© 2021 Fannie Mae
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Multifamily Economic and Market Commentary

4.0%

5.0%

6.0%

7.0%

8.0%

9.0%

10.0%

11.0% A B C

Class A Concessions Higher but Declining

Developers have primarily been building more expensive Class A units over the past decade. As has been the case 

for the past several years, increased competition among these projects has resulted in property owners often 

having to offer more generous concessions, which accelerated with the onset of the pandemic. 

At the end of 2019, the level of Class A concessions was 7.1%. It remained approximately at that level until April 

2020, when it rose 0.7% during the month to 7.8%. It continued to rise throughout 2020 and into early 2021, 

peaking at 9.9% in March 2021. And although the concession rate has been trending lower since then, it remains 

high at 9.2% as of October 2021 due to competing new supply entering many local submarkets. 

Classes B and C were not immune to rising concessions in 2020 and early 2021, as seen below. Class B 

concessions ended 2019 at 5.5%, but recently peaked at 8.1% during the summer of 2021. Class C began 2020 at 

5.4%, and while it surpassed Class B during the earlier part of 2021, it has now begun to trend downward, to 6.6% 

as of October 2021.

National monthly concession rates by class

Source: RealPage, Inc. 

Typically, when Class A demand softens, some tenants use the opportunity to rent more expensive units with 

better amenities, given that rents for these higher quality units are now within their reach. However, the reverse 

happens infrequently: Tenants tend to not move back into lower quality units when those rents fall. So as Class A 

rents declined and concessions rose, a similar trend occurred with Class B and C units, as seen in the chart above. 

And now that Class B and C concession rates are trending downward, that suggests that demand is increasing, 

likely keeping asking rent levels elevated. 

© 2021 Fannie Mae
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Multifamily Economic and Market Commentary

Sticker Shock Ahead?

The multifamily sector has experienced the effects of an increase in pent-up demand this past year, resulting in 

higher-than-average asking rents. And although tenants appeared to have benefited in the form of 

concessions, it may be fleeting, because the discounted rent from the concessions is only good for a short 

period of time (typically anywhere from the first month or so of free rent to discounted rent over the period of 

the lease). This suggests that there might be a form of “sticker shock” at the end of the lease term for many 

tenants. That is when the new rent increase will be based on the full amount of the rent, prior to the discount 

resulting from the concession. There is some concern that tenants may expect yet another concession to offset 

that increase, but that remains to be seen. 

Although the national concession rate remains elevated, fewer units are offering concessions. That trend is 

expected to continue over the coming months. And as seen in the case of Class C units – the most affordable 

units in a location – the declining trend in concessions offered has recently started accelerating, most likely 

due to the improving economy and increased job growth. 

As a result, we expect that concessions will continue decreasing, particularly for Class B and C units. We expect 

that the trend trajectory for Class A units will lag slightly behind, as new supply delivers over the next several 

quarters. But with the economy expected to continue and rental housing demand remaining firmly in place, we 

believe that concessions will decline throughout 2022, returning to more normalized levels by the end of the 

year. 

© 2021 Fannie Mae
Multifamily Economic and Market Commentary

5

Stephen Gardner

Senior Associate

Fannie Mae Multifamily Economics and Strategic Research

December 15, 2021

Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economic and 

Strategic Research (ESR) Group included in these materials should not be construed as 

indicating Fannie Mae’s business prospects or expected results, are based on a number of 

assumptions, and are subject to change without notice. How this information affects Fannie 

Mae will depend on many factors. Although the ESR Group bases its opinions, analyses, 

estimates, forecasts, and other views on information it considers reliable, it does not guarantee 

that the information provided in these materials is accurate, current, or suitable for any 

particular purpose. Changes in the assumptions or the information underlying these views 

could produce materially different results. The analyses, opinions, estimates, forecasts, and 

other views published by the ESR Group represent the views of that group as of the date 

indicated and do not necessarily represent the views of Fannie Mae or its management.

© 2021 Fannie Mae