With over 36% of Americans renting and rents skyrocketing over the last two years, affordability for renters is a huge problem. Whether you are a new or an existing renter, there are several factors that could significantly impact the cost of rentals. In this article, we will review key rental market trends, money saving strategies and the impact to your monthly rent. Before you sign a new lease, consider applying the relevant strategies below to get the best deal.
Market Trends for Rentals
Before we dive into specific money saving strategies, we will review three major rental market trends impacting rental prices:
First, inflation has significantly impacted rent prices. Based on Zillow’s April 2023 Rental Market Report, typical asking rents have increased 5.3% compared to last year. This growth can be attributed to expiring pandemic-era discounts, rent freezes, and higher overall costs due to inflation (e.g., maintenance, property taxes). Landlords are passing down their costs to renters. In analyzing Zillow’s market data, Boston MA, New York NY, San Diego CA, Miami FL and Orlando FL remain the most expensive markets with the highest rent increases.
In prime NYC neighborhoods, some landlords raised rents between 20% to 25% because they provided “sweetheart” pandemic deals and have kept rents constant despite growing maintenance costs and property taxes. This has created an unwelcome surprise for many renters resulting in them to re-consider the cost-benefit of living in NYC and whether it’s worth it.
Second, there is very limited rental inventory available. The key drivers include the following:
- Lack of renter mobility due to high costs of homeownership: High mortgage rates and homeowner costs means that homeownership is unaffordable. Therefore, renters are delaying their plans of becoming homeowners.
- High cost of switching: There is a high switching cost because signing a new lease requires 3-4 months of rent upfront (e.g., 1st and last month’s rent, 1 month for security deposit and 1 month broker fee)
- Shortage of new development: New rental units only represent ~1.5% of total rental inventory. With higher costs and tightening credit, real estate developers not only face a more difficult financial environment, but are questioning: is the risk reward worth it? In short, real estate developers are less financially motivated and more selective when investing in new construction projects.
As a result, almost two-thirds of renters renewed leases according to RentCafe’s 2022 year-end report. This suggests that renters are renewing leases even with rental price increases.
Finally, growing commercial office vacancies, closing of major retailers, and the spillover impact on local small businesses may impact rental prices in select markets. The actual financial impact on rents may vary by market. In neighborhoods where office vacancies are high, residential landlords may elect not to raise rents to avoid vacancy. However, in other areas, if landlords face higher property taxes to offset the city’s loss in tax revenue from commercial office buildings, then rents may become higher.
12 Strategies To Save on Rentals
To offset the rise in rental prices, we reviewed 12 strategies below to help you save money. Additionally, we estimated the potential cost impact relative to your monthly rent to inform prioritization.
1. Get a Roommate
Rent Impact: Up to 40 – 50% (depends on size of shared space)
Getting a roommate has always been the traditional option to lower your monthly cost by sharing the rent and utility bills. The key is finding a roommate that has a steady income and someone that respects your space.
The ideal situation is probably for couples to move-in together and split the bills. This is a common strategy to consolidate expenses and test living together, before taking the next big step in their relationship. Unfortunately, this is less feasible for families unless there’s a spare bedroom that you can sublet out.
Please check with your landlord to see if they allow subletting or having a dual occupant on the lease.
2. Fee vs. No Fee Rentals
Rent Impact: 1-2 months of rent
There may be significant cost savings between fee vs. no broker fee apartments. The cost savings from the real estate broker fee, could range from 1-2 months of rent! For “no fee” apartments, the landlord pays the broker to market the property and not the tenant. However, you should compare the rents between fee vs. no-fee apartments. Sometimes, landlords of “no fee” apartments charge higher rents by pricing in the broker fee.
Inquire directly with the leasing offices about rentals to save on the broker fee. Many times, buildings will advertise on billboards or the sides of their own buildings to call their leasing office about rental units.
3. Explore Smaller Size Rentals
Rent Impact: 2BR to 1BR: 23%, 1BR to Studio: 4-15%
Have you considered downsizing or being thoughtful about the amount of space you need? There can be meaningful cost differences depending on the size of your rental. For example, if you are a couple and you elect to rent a 1-bedroom instead of a 2-bedroom unit, you could save 23% on your monthly rent according to Zumper’s latest rental price data. If you are a single individual and rent a studio instead of a 1-bedroom unit, you could save ~4% to 15% in a major urban city like NYC.
4. Balance Wants vs. Needs for Rentals
Beyond location and size, landlords also price rental units based on the amenities they offer. Below, we researched the financial cost of these amenities as a percentage of the monthly rent. These estimates may help you make the trade-off decisions on which specific amenities you want to prioritize during your search.
As part of the analysis above, there are few caveats to disclose:
- The average water view premium of 51% is based on highly variable estimates across the country, anywhere from 25% to 250%. Valuation of water views vary based on access to boat navigation, lake vs. ocean views, as well as other factors.
- The premium for doorman vs. no doorman buildings is based on NYC Manhattan estimates and has been adjusted to exclude elevator amenity premiums.
- The stated 1% premium for floor is a per-floor estimate. For elevator buildings, each floor above the base floor could contribute on average 1%. Whereas, for walk-up buildings, the opposite is true.
Unsurprisingly, the most desired amenities (e.g., having a doorman, being on a high floor with unobstructed views, and having an elevator / gym / garage) also reflect the greatest cost influences on rent. For the top 3 amenities (excluding water views), key questions and trade-offs to consider might include the following:
- Doorman: Most renters view a doorman as the most desired amenity for safety and convenience (e.g., accepting packages and deliveries). Are you willing to pay a 34% rent premium vs. a non-doorman building? In major urban cities like Manhattan NY, the cost difference could be $1K to $1.4K per month! Additionally, non-doorman buildings are less expensive during the holidays. Tipping the doormen and building staff could run you a few extra hundred dollars a year!
- Elevator: While living in a walk-up may represent a significant hassle during the move-in and move-out process, is paying ~10% less on your monthly rent worth it? In NYC, this cost could be 10-15% of the rent.
- High Elevation View: Being on a high floor usually implies a bright apartment. In urban cities with a prevalence of skyscrapers, being on a high floor is high in-demand. Is it worth it if you have to pay ~11% higher rent vs. being on a lower floor?
Making a few trade-offs relative to your individual happiness could result in significant monthly savings!
5. Be Flexible with Neighborhood Choices
Rent Impact: Varies but could range between 7% to 15% (NYC rents)
Being flexible with neighborhood choices can add meaningful savings to your monthly rent. Would you consider neighborhoods that added 15-20 minutes to your daily commute?
For example, in NYC, pricing for 1-bedroom units vary significantly by neighborhood according to MNS’ Manhattan Rental Report below:
A common location trade-off is living in the Upper East Side (UES) vs. other midtown and downtown neighborhoods (e.g., Midtown East, East Village and Lower East Side). Financially, you would be able to save an extra 7 to 9% in monthly rent if you lived in the UES. The difference can be even greater if you compare living in the Upper West Side (UWS) vs. Chelsea. This could result in a 14% to 15% savings.
Even though every neighborhood has its unique characteristics, if you remain flexible, the rent savings can be substantial!
6. Sign Leases During The Off-Season
Rent Impact: ~1% to ~2% vs. summer rents with potential for 1-2 months of free rent for winter leases
According to Zillow’s April 2023 Rental Market report, renters may save on average ~1% to 2% on their monthly rent during the winter vs. the summer in a top 5 rental market (NYC, Boston MA, Miami FL, Orlando FL, San Diego CA).
While this appears to be only a modest discount, some landlords may offer 1-2 months of free rent as a concession. For example, landlords may offer 13 or 14-month leases where you pay the first 12 months, but they allow you to stay in the unit for month 13 and 14 for free. They provide these concessions largely to clear out remaining inventory that did not rent during the summer and fall months.
Therefore, consider living at home or a sublet for a few months to take advantage of pricing concessions during the off-season. The 1-2% difference in rent price not only impacts your monthly payment but also lowers your broker fees and security deposit.
7. Sign an Extended Lease
Rent Impact: ~1% to ~8.5% rent increase (depending on the market and landlord)
Savvy tenants negotiate with landlords to lock-in a longer lease term (e.g., 2-year leases) to avoid significant increases at time of renewal. However, be wary of landlords who try to get you to sign an 18-month lease if your current lease term begins and ends in the winter. This could transition your renewal period from winter to summer when market rents are higher. Winter renters that sign an 18-month lease will then provide the advantage to landlords because they can easily increase the rent at time of renewal and find new tenants that are willing to pay for the new rate.
8. Return Your Parking Space
Rent Impact: ~$225 / month
In large apartment complexes where there are not enough parking spaces for all tenants, your landlord might give you a discount if you return an unused parking space. According to Reinventing Parking, if construction for a parking spot on average costs the landlord $18,000, then the estimated average cost impact on a tenant’s monthly rent per spot is ~$225/month. In major urban cities like Los Angeles or NYC, the estimated average cost impact of a parking space could be closer to ~$300/month.
9. Consider New Apartments with Early Bird Deals
Rent Impact: ~1-2 months of free rent via 13- or 14-month lease
For some new buildings, landlords may offer early-bird deals for the first tenants because they need cash flow. Therefore, they may offer deals which may result in similar rents to older buildings and/or 1-2 months of free rent for signing a 13-14 month lease. They may even offer additional perks like free on-site gym membership for the first 3 months or other benefits.
However, newer apartments may also price at a premium because landlords have invested in fancier appliances, granite countertops, hardwood floors and other attractive amenities. Understand the benefits and also brace yourself for any potential rent hikes when your initial lease is up for renewal.
10. Book Movers 3-4 Weeks in Advance
Rent Impact: Up to 5-10% on Moving Fee
Book movers at least 3-4 weeks in advance during summer or at least 1-2 weeks in advance during winter. The best days to move are during the middle of the week, when fewer people are also moving. A Saturday or Sunday near the end of the month will book up quickly and generally has the highest rates.
11. Get Back Your Full Security Deposit
Rent Impact: Up to 1 month of rent
Don’t cause excess damage and take photos when you move in and out. When you arrive at the apartment, use your cell phone to take pictures of everything especially any points of damage before moving in your furniture and boxes. That way, if your landlord claims damage when you move out, you’ll be able to provide time-stamped photos showing you are not liable.
When moving out, take photos of the empty apartment right before you close the door for the last time. In NYC, landlords have 14 days to either return your security deposit in full or give you an itemized list of deductions. If on the 15th day after your lease ends your landlord still has not give you an itemized list of deductions, technically, they must return the full security deposit to you. This 14 day requirement is part of the NYS 2019 rent law known as HSTPA.
12. Negotiate Rent and Work For Your Landlord
Rent Impact: Varies
Finally, always try to negotiate your rent–but be careful during the peak seasons, as competition can be fierce and you have no leverage! The practical approach is to highlight your best qualities as a tenant (e.g., stable income, personal references, quiet, no parties, no pets, no smoking, respectful of community) that would resonate with the landlord. For example, they prefer tenants with qualities that could potentially save them money, lower their income risk and minimize their “hassle” factor. Share all of these details in a detailed covered letter and attach your personal reference letters with your rental application.
Beyond highlighting your best qualities, some tenants have offered to work for the landlord in exchange for a reduced rent. For example, if you are handy and you notice that their appliances or repairs that are needed in the unit, offer to fix it yourself for a reduced rent.
We hope you found our summary of the various strategies and their potential financial impact on your monthly rent helpful. Good luck in your apartment search and if there are any pro rental tips that you’d like to share with our audience, please add a comment below!
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