Rent Concessions Are Back: What You Need to Know

As of September 2020, 67% of Class A apartment buildings in downtown Chicago are offering at least one month free rent on new leases. In some submarkets, that number exceeds 80%. Concessions have not been this widespread since 2010.

This sounds like unequivocal good news for renters. Mostly, it is. But concessions have nuances that most renters miss, and those nuances can cost you money in year two and beyond. Here is everything you need to know.

Types of Concessions

Not all concessions are equal. Here are the most common types, ranked by actual value:

Free Months (Highest Value)

The most straightforward concession. You sign a 12-month lease, and 1-3 months are free. The free months are typically applied as a credit spread across the lease term (you pay a lower amount each month) or as the last month(s) free (you stop paying early). The first structure is more common and better for cash flow.

The math: 2 months free on a 12-month lease at $1,800/month gross rent.

• Total lease cost: $1,800 x 10 = $18,000
• Monthly net effective rent: $18,000 / 12 = $1,500
• Discount: 16.7%

Reduced Security Deposit (Medium Value)

Security deposits are typically one month's rent. Some buildings are reducing this to $250-500 or waiving it entirely. This is real money you do not have to tie up, but it is a one-time savings, not a recurring monthly benefit. On a $1,800/month apartment, a waived deposit saves you $1,800 upfront but does not reduce your monthly cost.

Waived Amenity Fees (Medium Value)

Some newer buildings charge a monthly amenity fee of $25-75 for access to the gym, pool, co-working space, and package locker. Waiving this for the lease term saves $300-900 per year. Check whether the waiver applies only to year one or for the full lease term.

Free Parking (High Value in Downtown)

Parking in downtown Chicago costs $150-300 per month. If you have a car, a free parking concession is worth $1,800-3,600 per year. This can be more valuable than a free month of rent. Always ask about parking concessions separately from rent concessions because buildings often do not advertise them.

Waived Application Fees (Low Value)

Application fees are typically $35-75 per person. Waiving them is nice but immaterial relative to the other concessions available right now. Do not let a waived application fee be the deciding factor in choosing an apartment.

The Net Effective Rent Trap

This is the most important concept in this article. Net effective rent is your true monthly cost after concessions. Gross rent is what the lease says you owe per month. They are very different numbers, and the difference will catch you at renewal.

Example: a building advertises "$1,500/month with 2 months free." The gross rent written on the lease is $1,800. The 2 free months reduce your total first-year cost to $18,000, which divided by 12 months gives a net effective rent of $1,500.

But here is the catch: when your lease comes up for renewal, the building renews based on gross rent, not net effective. Your renewal offer will be based on $1,800 plus whatever increase the building applies (typically 2-5% per year). So your year-two rent is $1,836-1,890 per month. That is a 22-26% increase from what you were effectively paying in year one.

This is not deceptive. It is how concessions work. But many renters experience sticker shock at renewal because they budgeted based on their net effective rate, not their gross rate.

How to Protect Yourself

1. Always calculate both net effective and gross rent. Net effective tells you what you will pay this year. Gross rent tells you what you will pay next year (approximately).
2. Ask about renewal terms at signing. Some buildings in the current market are offering rate locks: a guarantee that your renewal will not exceed a certain percentage increase. This is rare but valuable. Ask for it.
3. Consider the multi-year cost. If you plan to stay two years, calculate the total cost: (year 1 net effective x 12) + (year 2 estimated rent x 12). Compare this against a building with lower gross rent but no concession. The lower gross rent may be cheaper over two years even if the net effective is higher in year one.
4. If you only plan to stay one year: Chase the deepest concession. Net effective is all that matters for a single year. Three months free on a 12-month lease is a 25% discount. Take it.

When Concessions Signal Weakness vs. Standard Practice

Not all concessions mean the same thing. Understanding why a building is offering concessions helps you evaluate the deal:

Lease-Up Concessions (Temporary)

A newly built building needs to fill 200-400 units from zero. They offer aggressive concessions to reach stabilized occupancy (usually 90-93%). Once stabilized, concessions disappear and rents increase. These are genuine deals but they come with a caveat: the building is unproven. There are no resident reviews, no track record of maintenance responsiveness, and you are essentially beta-testing the building.

Market Correction Concessions (Cyclical)

What we are seeing now. Occupancy has dropped across the board, and buildings are offering concessions to retain and attract tenants. These concessions will shrink as the market recovers. If you can lock in a 14-month lease with concessions now, you are capturing value that will not be available in 12 months.

Chronic Concessions (Red Flag)

Some buildings offer concessions year-round, regardless of market conditions. This usually signals a structural problem: bad management, maintenance issues, noise problems, or an undesirable location. If a building was offering two months free in January 2020 (before COVID, in a strong market), ask why. Read the reviews. Chronic concessions are a warning, not a deal.

The best concession is a temporary one driven by market conditions at a building that does not normally need to offer concessions. That is a genuinely below-market price on a quality product. The worst concession is a permanent one at a building that always struggles to fill units. That is a fair price on a compromised product.

How to Negotiate Concessions

In the current market, concessions are offered proactively by most buildings. But you can often get more than what is advertised:

• Ask what is available, not what is advertised. Buildings often have a concession budget that exceeds what is on their website. The leasing agent can offer more but will not volunteer it.
• Get competing offers in writing. If Building A is offering 2 months free and Building B is offering 1 month free, show Building B the offer from Building A. Buildings match competitors routinely.
• Offer a longer lease term. A 14-month or 15-month lease is more valuable to the building than a 12-month lease (less turnover risk). Offer the longer term in exchange for an additional concession.
• Ask for non-standard concessions. Parking, storage units, and amenity fee waivers are easier for buildings to grant than additional free months because they do not reduce the headline rent number that owners track.
• Be ready to sign. Concessions are time-sensitive. A building offering 2 months free today might offer 1 month free next month if occupancy improves. Having your application documents ready signals that you are a serious prospect, which makes the leasing agent more willing to advocate for additional concessions.

The current concession environment is the best opportunity for renters in a decade. But the value is only captured if you understand the math, plan for year two, and negotiate beyond what is advertised. Do the work. The savings are real.