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Apartment incentives lure tenants - but at what price?

By Maxine Shapiro, KERA 90.1 commentator

Dallas, TX – So your lease on your apartment is almost up. Do you stay, do you move? It's not an easy decision when you're being seduced by all the different kinds of incentives. I'm Maxine Shapiro with KERA Marketplace Middays.

"Things couldn't be better." So says Jay Ferguson at Apartment Finders.

He was talking in terms of the renter. Things are not so good for the apartment owner. According to the Dallas Business Journal, rental property occupancy is at a low 91%. That actually sounded okay to me, but I thought about it - that's nine out of every hundred rentals that are empty. Apartment owners are much happier when the occupancy rate is over 95%.

So what happened to apartment rentals and how can the lessee benefit? If we go back to the year 2000 rentals hovered at 95% occupancy. New rental properties were popping up all over the place. People were doing well in the stock market and the job market was flourishing. Flash ahead to 2001. Vacancies started growing for a few reasons. People began losing their jobs and had to move out. Interest rates began to fall, convincing people to become new homeowners. And the lease market was just overbuilt. The next logical step for the apartment owner was to offer incentives either for moving in or staying.

Jane Decker of Accent Locators told me that she's seeing a change in these incentives. Let's say an apartment complex was offering one month's free rent for moving in. Sounds good. Most of the time, this free month's rent was prorated over the 12-month lease. Most residents liked that. The problem arose 12 months later when their rent returned to market value excluding the prorated discount. Sticker shock! So now the complexes that are offering one-month free rent are only prorating it over the first, say, four months.

But owners also had to start being creative in keeping the tenants they've got - offering parties throughout the year, which is great if you're single, giving gift certificates to restaurants or department stores for renewing. The dilemma for a tenant to stay or leave for a better incentive can be easily calculated. How much will it cost for movers and can your back go through one more move? And do you find joy in living out of boxes? I know what I would do. For KERA Marketplace Middays, I'm Maxine Shapiro.


Marketplace Midday Reports air on KERA 90.1 Monday - Friday at 1:04 P.M.