QuickTake: How Multifamily Concessions Are Reshaping Refinance Underwriting

Free rent is no longer just a leasing tool, it’s part of the refinance math.

As concessions persist in several multifamily markets, lenders are underwriting to net effective rent and longer stabilization timelines. That shift is reshaping refinance outcomes for owners.

#1 Timing Changes the Underwrite

Concessions are not all treated equally. Lenders draw a clear distinction between incentives used during initial lease-up and concessions required to maintain occupancy once a property has already reached stabilization.

Underwriting Impact

Concessions at stabilized occupancy raise concerns that incentives may persist longer than expected, often leading lenders to apply more conservative assumptions around effective rent, leverage and proceeds.

#2 Effective Rent Wins

Headline rent no longer carries the weight it once did. Lenders are underwriting to net effective rent and economic occupancy, embedding concessions directly into trailing income assumptions rather than assuming they disappear in year one.

Expert perspective

“Most lenders have moved past treating concessions as short-term lease-up tools. Today, they’re underwriting to net effective rent and embedding concessions directly into trailing income assumptions.”

Cheryl Higley
Managing Director, Debt + Equity
Austin, TX

#3 Stabilization Takes Longer

In supply-heavy markets, lenders are extending stabilization timelines well beyond historical norms. What once underwrote to 12 months is now often modeled at 18 to 24 months.

What lenders are watching

• Submarket concentration of new deliveries
   
• Ongoing “shadow supply” still being absorbed
   
• Competitive concessions offered by nearby properties 

#4 Renewals Tell the Story

The biggest disconnect between owners and lenders is how quickly concessions can be normalized. Lenders are increasingly skeptical that tenants will convert to full asking rents once initial incentives expire.

What proves durability

Owners who can prove strong post-concession renewal performance materially improve lender confidence and underwriting outcomes.

Expert perspective

“Lenders draw a clear line between concessions used during lease-up and those required to maintain stabilized occupancy. If renewals can be signed without incentives, underwriting assumptions tend to be far less conservative.”

Grant Harris
Vice President, Producer
Charlotte, NC

The Takeaway

Concessions are no longer just a leasing decision. In today’s refinance environment, they are an underwriting signal. Owners who understand how lenders interpret timing, effective rent, stabilization and renewal performance are better positioned to protect leverage and proceeds.