Rent concessions are reemerging as one of the clearest signals of competitive pressure in multifamily, as a historic surge in new supply squeezes margins and raises questions about how well loans will perform in 2026, according to Trepp. While lenders have not broadly widened risk pricing, Trepp cautions that operational risks are building beneath the surface as the gap widens between quoted rents and what tenants actually pay.
Trepp notes that nearly 592,000 multifamily units were completed in 2024, the largest one-year increase since 1974, with about 750,300 units still under construction as of early 2025. Completions are expected to taper back toward long-term averages through 2026, but the current wave has already pushed vacancy higher and intensified competition in many markets.
The impact of this new supply is uneven, with Trepp describing a bifurcated market in which national vacancy has climbed even as rent pressure is most acute in Sun Belt metros that have seen the heaviest building. By late 2025, the national multifamily vacancy rate had risen to 7.2% and median asking rents had fallen 1.0% month over month, yet low-leverage multifamily loan spreads over the 10-year Treasury remained tight in the low 140s, indicating lenders have not broadly added risk premiums.
Over the past decade, Trepp’s data show that multifamily revenue grew at a compound annual rate of 4.96%, while expenses rose 4.15% per year. The biggest drag on margins has been insurance, which Trepp reports increased at nearly a 12% compound annual rate for a cumulative 172% jump over 10 years, with real estate taxes climbing 5.43% annually, changes the firm says have “materially altered margins relative to earlier underwriting assumptions.”
Against this backdrop, the influx of new units has put additional pressure on income, particularly in areas with concentrated supply. Trepp notes that heavier use of concessions—such as periods of free rent, waived fees, reduced deposits, or move-in credits—has widened the gap between published asking rents and effective rents, making cross-market comparisons more difficult and obscuring true rent performance.
Those concessions directly reduce cash flow, net operating income, and debt service coverage ratios, Trepp explains. Because many lenders underwrite and monitor performance using reported asking rents, Trepp warns they risk overstating property income and valuations, especially where original underwriting assumed continued rent growth rather than discounted effective rents.
The report highlights particular concern for properties financed through securitizations, where heavy reliance on concessions can leave bond investors exposed to cash flows that fall short even when physical occupancy appears strong. In these situations, Trepp suggests that economic vacancy and the true level of incentives may be more telling than headline rent or occupancy statistics.
Looking ahead, Trepp frames rent concessions as a key indicator for 2026 as the market works through elevated new supply, evolving rent expectations, and shifting tenant behavior. “The central question for 2026 is whether moderating supply and improving demand conditions will allow concessions to burn off, or whether elevated incentives will remain a defining feature of the leasing landscape,” the firm wrote.
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