Rents have increased all across the country. The rate of increase is slowing, but overall continues upward. However, many landlords across the country are advertising discounted rents of over 20% below rental listings. And in Denver about 10% of listings are getting price cuts. If rents are so high, why are landlords lowering their asking prices?
Offering some form of concession to entice potential renters is not a new phenomenon. For example, one free month’s rent or gift cards are occasionally offered to sign a lease. Cutting down monthly rent is not the same thing. In fact, the slashing of rent prices can be purely artificial. Landlords are simply asking for more than the unit is worth, and renting for less than the inflated price. While the rent ends up the same, it appears to be a better deal because it is listed as a discount. Most discounts in Denver are low, around 5%, which is still attractive to renters.
Deception is not the motive in most cases as most landlords are honest in their listings. So, why would an honest landlords also be cutting their prices? Data scientist Mark Uh, thinks there are two reasons. The first is that rents are being pushed too high. With no renters willing to pay, landlords are forced to lower prices. “Landlords have been listing units too high,” said Uh. “When they reduce the price, they’re finding people who are eager to rent.”
A second reason for lower rent is competition. Areas where rents haven’t gotten so high are much more competitive in price. So, in order to secure renters, landlords need to reduce prices to beat out other options on the market.
One reason for the rise in rental listing rates is the practically vertical real estate price movement over the past few years as landlords are looking to recover the cost of purchase.
The majority of rent cuts commonly occur during the fall. This is because landlords are trying to rent units left over from summer. However, the amount of units getting a price reduction has gone up this year. Nationally it has grown by about 0.5%, but up to 9% in cities like Denver. So, while some markdowns may be just a sales tactic, there are reasons why rents are going down in some cases.