The rise of rental rewards, a new form of concession

Rent prices haven't dropped much, but some renters are being enticed by rental rewards programs, which have become increasingly popular. Landlords are getting in on the credit card-like rewards, offering incentives like 2% cash back or points they can exchange for home goods or gift cards. After a boom in multi-family apartment construction, landlords are eager to fill empty apartments. But are the rewards worth it for new renters?

What kind of rewards can renters earn?

Currently, more than two million renters in the U.S. are enrolled in a program that rewards them for paying their rent on time, signing a new lease or renewing their rental agreement. While earning reward points on some credit cards by paying your rent is possible, "fees charged by landlords wipe out most benefits," said The Wall Street Journal. Instead, landlords are partnering with one of a dozen companies behind renter incentives, including Stake, Incentco and Piñata.

Traditionally, landlords would offer more expensive concessions such as a month of free rent or a discount on utilities; these new programs provide smaller monthly rewards. Some rental-rewards programs, like Stake, offer up to 2% cash back and will cover the landlord fees for paying your rent online. The monthly payouts might not seem like much, but "when you're being overcharged for rent and you're unemployed, getting even that [amount] back every month is a blessing," Ernest McKee, a renter in Texas, told the Journal. With these programs, people can gain points for making payments, and they can then "cash in points for home goods, gift cards and other products from merchants including Amazon, CVS, Target and Walmart," the outlet said.

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Why are landlords offering more concessions?

The number of rental listings offering a concession jumped sharply in the fall of 2023 and has "persistently remained near one in three rentals with a concession in the months since," Zillow said in its July 2024 Rental Market Report. The trend is driven mainly by a multifamily construction boom that continues to rise. More multifamily units were completed in June than in any month in almost 50 years. The abundance of empty apartments is "opening up new options for renters and spreading demand across more homes."

Are rental rewards worth it?

While earning a small amount of cashback or prizes is "better than nothing," the rewards are "relatively tiny compared with the cost of rent," said the Journal. "They're also generally worth less than the more conventional incentives landlords offer." In the first half of 2024, the average rental concession was equivalent to 5% of annual rent, according to Moody's Analytics, which estimated the average rent for the year at $1,750 monthly. 

By contrast, Piñata renters make about $125 in rewards a year if they pay their rent on time, which is about 0.6% of Moody's average annual rent figure. "A tenant would have to stay in their unit at least nine years to get a value comparable to the average concession," the Journal said. Renters looking for a place to live "shouldn't let the rewards blur the bigger picture," Brad Hargreaves, a real estate analyst, told the Journal. If the landlord tries to raise the rent by 10%, "that is going to blow away any potential savings you can get from the rewards."

For landlords, the benefit is more apparent. Some incentive companies say their programs make people more likely to renew, even if the rent increases. Around 97% of Piñata renters renewed their leases in 2021, and the company said almost all signed at a higher rent. The program can also help landlords determine how much they can increase their tenants' rent, Piñata CEO Lily Liu said to the Journal.

Because the rewards from these programs are usually worth less than a free month of rent, landlords save money on concessions in the long run, Gerry Wiatrowski, cofounder of rewards company Incentco, said to the outlet. About a million renters get rewards by racking up points through Incento, though each point is only worth about 3 cents, he said. "It's the psychology of points," he said. "The perceived value is higher" than that of money itself.