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How To Increase Lease Renewals By Using Renewal Incentives

How To Increase Lease Renewals By Using Renewal Incentives

Resident retention is a particularly challenging facet of student housing. This is largely due to the renting tendencies of students, who are often considered as transient renters. What we mean by transient renters is that they frequently change their living accommodations over the course of their academic careers. This can be rather taxing to landlords and property managers, as low renewal rates create the constant need to find replacement tenants. But what if there was a simple way to boost lease renewals?


Renewal incentives are incredibly easy to implement and often aren’t particularly costly; yet surprisingly, they aren’t very common in the student housing sector. In many cases, renewal incentives can help boost lease renewal rates and can also increase tenant satisfaction.

A survey was conducted by The Rent Roll, which contains valuable information about what types of incentives are preferred. Some of the key findings were:

  • Rent discounts were the most widely preferred monetary incentive.
  • Covered parking facilities and gym memberships were the most preferred non-monetary incentives.
  • The best time to offer incentives was during the lease signing or right before a tenant’s lease expires.


Furthermore, the survey listed four key types of incentives and asked respondents their preferred type:

  • Monetary – 52%
  • Unit Upgrade – 27%
  • Free Service – 11%
  • Household Item – 11%


Without a doubt, monetary incentives hold the most weight. The survey went on to detail what types of monetary incentives were most preferred:

  • Discount on rent – 58%
  • Cash – 28%
  • Security deposit rebate – 10%
  • Gift card to a popular retailer – 4%

 

One thing worth noting is that the survey broke down preferences by age groups. For student housing, the focus group would be the 18 – 25 age bracket, where 29% reported preferring discounted rent and 17% reported cash.

 

As for non-monetary incentives, when it came to unit upgrades the preferences were:

  • New carpet/flooring – 31%
  • Washer/dryer – 30%
  • Kitchen appliances – 30%
  • New wall paint – 8%


By piecing all of this information together, student housing landlords and property managers can identify what type of renewal incentives will be most successful with their student demographic. Retaining residents is far more cost-effective than constantly replacing tenants; which is why it makes sense to try and motivate current residents to stay.

 

Student housing landlords and property managers can focus on offering either rent discounts for lease renewals in advance (or extended lease agreements), or alternatively cash bonuses. These two options hold the greatest weight in terms of motivation for renters aged 18 – 25. Non-monetary incentives are less likely to encourage younger student renters to resign.

Lastly, it’s important to keep in mind that low lease renewal rates can be symptomatic of a broader problem, which may not be resolved solely through offering renewal incentives. However, in many cases within student housing, lease renewal rates can be improved by taking a more proactive approach and utilizing incentives to increase a tenant’s motivation to stay longer.

The full survey and report by The Rent Roll.

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This comment was minimized by the moderator on the site

Do you have any data from actual use of these various incentives? Surveys asking people what they value and how they'll decide something are notoriously unreliable as predictors of actual behavior, i.e. what people say they'll do is usually VERY different from what they actually do. The only reliable indicator is actual consumer decisions in real-life situations (read up on Daniel Ariely for many examples of this).

  Donald Davidoff
This comment was minimized by the moderator on the site

Hi Donald,

Thanks for your feedback. The objective of this article was merely to highlight various renewal incentives and strategies, not to conduct a case study analysis of these incentives in a real-life scenario. However, I wouldn't discount this information as not valuable based solely on the assumption surveys are 'notoriously unreliable'. There is some useful information here, even if it's only in the form of survey responses.

  Places4Students
This comment was minimized by the moderator on the site

I think it's always interesting to review options and discuss them. The blog is valuable in that sense. I respectfully disagree with the notion that there's useful information in the survey results. If you're disagreeing that surveys are "notoriously unreliable," then I suggest you do the literature research on surveys related to pricing and purchase decisions. The only reliable methodology I've ever encountered is conjoint analysis. Normal "what would you pay...?" or "what do you prefer ...?" are proven to be unreliable (check out Daniel Ariely's work). If the data are unreliable, then what's the value? In fact, I could argue negative value if it's used to make a decision that turns out to be the opposite of how people behave. I don't mean to sound argumentative (blog comments, like emails, are terrible at tone and nuance). I'm just saying that the only way to predict how consumers will behave is to measure their actual behavior, not ask them how they will behave.

  Donald Davidoff
This comment was minimized by the moderator on the site

I believe using the right survey methodology and asking the right questions is the key to obtaining reliable and actionable feedback. It is essential to make a distinction between what is good to know and what one needs to know. I strongly agree with Donald (being that I am a huge fan of Dan Ariely), that as wonderful as it is to know everything the survey says, it would hardly be prudent to make decisions without taking stock of "ACTUAL" decisions and behavioral patterns of renters and leaseholders over the course of time, and how these decisions and patterns were influenced by the incentives .

  Ed
This comment was minimized by the moderator on the site

Hello,
I am a Property Manager. I ran a student property - UCR - University of CA Riverside, for 5 years from lease up. My profile was 98% international students. I found that each year end in June the students would ask if they could 'store' their belongings in their apartment for 2 months until they returned in September. Obviously, we couldn't accomodate them without charging rent. The second year came and the same issue presented itself. I thought that, based on the previous year's history, we would be better off just concessioning 1/2 month of July and 1/2 month of August and pro-rating September in order to keep our students in place. This led to a decrease in all turn costs - vacancy loss, actual turn costs and possible concessions anyways as the summer was a slow period in our micro-area. I approached the owners and management company with this suggestion and was promptly shut down. The third year rolled around and I again fought for what I thought was the perfect solution (keep the residents in place, avoid the turn costs). They (owners/management company) finally listened after the 2 prior years and - guess what? We saved turn costs, concessions we would have given anyways or lost in vacancy loss and kept the community stable. Our word of mouth grew and I had an ongoing waiting list. It was a relief to not have to fight that fight with the owners/management company the next 2 years. (In the meantime, our competitors were giving away TV's, 'trips', Visa gift cards, etc) and having huge turnover over the summer months. Working with the students and their school schedules turned out to be the best idea I had; I just had to fight for it.
Thanks for the great article - I'm always learning in all ways.

  Michelle
This comment was minimized by the moderator on the site

Hi Michelle,

That's a clever strategy especially with international students or even students living out of state. Accommodating to the students schedule is definitely an ideal way of catering specifically to their needs to encourage lease renewals. Thank you for contributing this great idea!

  Places4Students

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