24.8% of Houston Apartments Still Come With a Concession

Westgrove, a new building in Timbergrove, was offering 10 weeks of free base rent when Taco Street Locating last checked its list of recently opened Houston buildings on Oct. 14. Prose Riviana in Katy advertised up to 10 weeks plus a $1,000 gift card, and The Mill in the East End offered eight weeks.

Eight of the 11 buildings on that list had a move-in special. Ely at the Ballpark downtown offered up to six weeks for move-ins by Oct. 31, and Rone Residences in Upper Kirby offered four weeks on select floor plans.

Across the country, landlords are cutting back. RealPage reported on Oct. 20 that 14.5% of stabilized U.S. units carried a concession in September, the fourth monthly decline in a row and down from 17% in May.

The discounts that are left are as deep as they have been in more than 15 years. The average concession edged up to 11.1% from 11% in August, which CRE Daily put at about 5.8 weeks free on a one-year lease.

RealPage compared it with March 2010, when the average concession was also about 11% but half of the stabilized stock was discounted.

Houston sits well above the national share. In August, 24.8% of Houston units offered a concession, according to RealPage data cited by Trepp and reported by GlobeSt, against 15.4% for the U.S.

That put Houston eighth among large markets, a tenth of a point behind Dallas at 24.9%. Austin led at 35.3%.

Where the discounts sit

RealPage's September numbers split the market by class. Class C usage fell 1.4 points to 18.1%, Class B fell to 13% and Class A to 12.5%, while the average discount ran from 10.8% in Class B to 11.5% in Class A.

Houston rents line up the same way. RealPage chief economist Carl Whitaker wrote on Oct. 13 that Houston's Class A rents rose 1% from a year earlier in the third quarter, while Class B fell 1.9% and Class C fell 5.4%.

Listing data shows a wider spread. Realtor.com found that 60.3% of Houston studio, one- and two-bedroom listings offered a concession in August, against 43.5% across the 50 largest metros, and named Houston first among the 39 metros where concession rates rose from a year earlier.

Realtor.com counts advertised listings and RealPage counts stabilized units, so the 60.3% and the 24.8% measure different things.

Why Houston is slower to pull back

Supply is the biggest reason. RealPage's Oct. 12 forecast has Houston adding about 13,000 to 13,500 units over the next four quarters, alongside Phoenix and Charlotte, and puts Houston's rent growth at 0.5%, the lowest in the forecast.

Rents are still soft. Apartment List put Houston's September rent change at 0.0%, with the city median of $1,269 down 2.3% from a year earlier, and Yardi Matrix named Houston among 14 of the top 30 metros with negative annual rent growth in September.

Demand has held up better than rent. Cushman & Wakefield counted 26,000 units absorbed in Houston through the third quarter, fifth in the country, and the Greater Houston Partnership says the metro has 33,600 more jobs than a year ago even after losing 7,300 in September.

Layoffs are light. The Houston Chronicle counted 356 layoffs filed with the Texas Workforce Commission in the third quarter, against 2,750 a year earlier, and the metro's unemployment rate fell to 4.6% in September from 5% in August.

Statewide, the Dallas Fed expects Texas jobs to grow 0.9% in 2026, even though the state lost 18,900 jobs in September.

Whitaker's leading theory is that single-family homes are pulling Houston renters away faster than usual. Buying still costs more than it did: Freddie Mac's average 30-year rate was 7.32% on Oct. 22, against 6.19% a year earlier.

The new supply is thinning out. Philip Morgan of The Morgan Group told Bisnow on Oct. 19, "We are clearly closer to the end of the supply than we were two years ago."

Construction Dive reported that U.S. starts of buildings with five or more units ran at a 349,000 annual rate in September, down 25.9% from a year earlier.

What it means for owners and investors

A concession of 11.1% is rent an owner does not collect on that lease. Class C has the highest usage nationally and the steepest Houston rent decline over the past year, so that is where asking rent and collected rent are likely furthest apart.

Pricing has barely moved. RealPage, using MSCI data, put the national apartment cap rate at 5.4% for an eighth straight quarter.

Debt costs more than that. Northmarq's Oct. 22 rate sheet quoted a 10-year Freddie Mac loan at 65% leverage at 6.13% to 6.28%.

Rates did ease this week. The 10-year Treasury closed at 4.96% on Oct. 22, its first close below 5% this month, after 5.13% the day before.

Westgrove's 10 weeks is a lease-up offer. Owners of stabilized buildings nearby compete with it for the same tenants until the new building fills.

What to watch next

RealPage has not yet published Houston's concession share for September. The national share fell 0.9 points that month, the sharpest of the four declines, and the next metro ranking will show whether Houston moved with it.

The Federal Reserve meets Oct. 27 and 28, and Realtor.com's next monthly report should replace the August listing figures with September data.

The Oct. 14 survey covered 11 buildings. Nobody has yet published a weeks-free figure for Houston as a whole, so how far the lease-up specials reach into older stock is still unknown.