Quick Answer: Concessions are explicit discounts offered to attract or retain residents — free rent months, reduced deposits, or gift cards. Loss to lease is the gap between market rent and in-place rent on existing leases. Concessions are a deliberate pricing decision that reduces revenue; loss to lease is an inherent market condition resulting from leases signed at prior rates. Both reduce revenue below gross potential, but through different mechanisms.
See our full guides: Concessions and Loss to Lease.
What Are Concessions?
Concessions are any incentive or discount offered to a prospective or current resident to encourage lease signing or renewal. The most common form is free rent (e.g., "one month free on a 12-month lease"), but concessions also include reduced security deposits, waived application fees, gift cards, and rent reductions.
Example: $84,000 total concessions ÷ $4,200,000 GPR = 2.0% concession as % of potential rent
What Is Loss to Lease?
Loss to lease is the difference between market rent and the contractual in-place rent on occupied units. It exists because leases were signed at rates below where the market currently stands. The market has appreciated since the lease began.
Example: ($1,800 − $1,680) ÷ $1,800 = 6.7% loss to lease
Key Differences: Concessions vs Loss to Lease
| Factor | Concessions | Loss to Lease |
|---|---|---|
| Cause | Deliberate incentive to lease | Market rent appreciation over time |
| Controllability | Fully controllable (can stop offering) | Partially controllable (close at renewal) |
| Duration | One-time or limited period | Persists until lease renews |
| Recoverability | Lost permanently | Captured at renewal or re-lease |
| Market signal | Weak demand or oversupply | Strong rent growth (positive sign) |
| Impact on net effective rent | Reduces net effective below gross | No impact (already at contract rate) |
When to Use Each Metric
Track concessions when: Evaluating leasing strategy effectiveness, measuring the true cost of filling vacant units, comparing marketing spend to concession spend, or assessing whether market conditions require incentives to lease. Rising concession levels are a leading indicator of market softness.
Track loss to lease when: Quantifying organic rent growth potential, underwriting acquisitions, setting renewal pricing strategy, or projecting revenue growth from lease rollovers. Loss to lease is a measure of unrealized revenue that will be captured as leases renew.
How They Relate in Practice
Concessions and loss to lease both reduce actual revenue below gross potential rent, but they appear at different points in the revenue waterfall. Loss to lease is the gap at the top: in-place rents are below market. Concessions are a secondary discount applied on top of (or instead of) the lease rate.
A critical distinction for underwriting: loss to lease represents upside — it is revenue that can be captured through renewals and new leases over the next 12–18 months. Concessions represent cost — revenue that has been permanently given away to secure a lease. An acquisition target with 8% loss to lease and 1% concessions is much healthier than one with 2% loss to lease and 6% concessions, because the first has organic growth ahead while the second is buying occupancy with discounts. Use our net effective rent calculator to see how concessions reduce your true rent, and explore BubbleGum BI's market intelligence tools to track both metrics as distinct components of your revenue waterfall.
Track Concessions and Loss to Lease Separately
BubbleGum BI breaks down your revenue waterfall — showing concessions, loss to lease, bad debt, and vacancy as distinct components so you can address each one strategically.
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