Net effective rent: what you actually pay
Net effective rent is the lease rent multiplied by the months you actually pay, divided by the months in the lease. A $2,847 lease rent on a 12-month lease with one month free works out to $2,847 × 11 ÷ 12 = $2,610 a month. A 4% renewal on the lease rent is $2,961, about 13% above what you paid.
What does net effective rent mean?
Net effective rent is the average monthly rent after a move-in special is spread across the whole lease. The lease rent, also called the gross or face rent, is the number written in the lease. A special such as "one month free" or "$1,000 off" lowers what you pay in total, but it does not change that written number. Many buildings advertise net effective rent because it is lower. Your renewal, your deposit and any rent cap are usually based on the lease rent instead. Knowing both numbers tells you what you actually paid this year and what the landlord will treat as your rent next year.
What is a rent concession?
A rent concession is a discount a landlord offers to get a lease signed, such as free weeks or months, dollars off, waived fees or free parking. It lowers what you pay without lowering the lease rent written in the lease. Net effective rent is how you put a number on it: spread the concession across the lease and you get the average rent you actually pay each month. Concessions are most common in larger buildings with several empty units, and they tend to grow when more units sit vacant. For whether rents in general are falling where you live, see is rent going down.
How do you calculate net effective rent?
Multiply the lease rent by the number of months you pay, then divide by the months in the lease. For a dollar amount off, subtract it from the lease total first. For weeks free, convert weeks to months at 52 ÷ 12, about 4.33 weeks a month.
| Special | Formula |
|---|---|
| Months free | lease rent × (lease months − free months) ÷ lease months |
| Weeks free | same, with free months = weeks ÷ 4.33 |
| Dollars off | (lease rent × lease months − dollars off) ÷ lease months |
Worked example: $2,847 × 11 ÷ 12 = $2,610 a month, a saving of $237 a month against the lease rent.
Why does the renewal use the higher number?
A renewal offer is normally written as a percentage of the lease rent, because that is the rent in the lease. The free month was a one-time incentive. In the example, a 4% increase on $2,847 is $2,961. Against the $2,610 you actually paid each month, that is about 13% more, or $351 a month.
California's rent cap (AB 1482) works the same way. California Civil Code section 1947.12(a)(1) measures the cap from the lowest gross rental rate in the prior 12 months, and says discounts, incentives, concessions or credits accepted by the tenant "shall be excluded" when finding that rate. So a free month does not lower the base the cap is measured from. See the California Attorney General's housing page and our page on rent increase limits. This is general information, not legal advice.
How do you compare two apartments with different specials?
Compare net effective rents for this year, then compare the renewal each one implies, because the renewal is based on the lease rent. Apartments A and B below are illustrative, not real listings. Both are 12-month leases, and the renewal column is the lease rent plus 3%.
| Lease | Special | Net | Renewal | vs paid | |
|---|---|---|---|---|---|
| A | $2,400 | None | $2,400 | $2,472 | +3% |
| B | $2,600 | 6 wks free | $2,300 | $2,678 | +16% |
Apartment B costs less this year: $2,300 against $2,400. At renewal it asks $2,678, which is $206 a month more than Apartment A, and about 16% above what you paid. If you plan to stay more than one year, the lower lease rent can be the better deal.
What does "up to 8 weeks free" mean?
It means at most eight weeks, not eight weeks on every unit. Buildings often apply the full special only to certain floor plans, move-in dates or longer leases, and give less or nothing on the rest. Eight weeks is about 1.85 months (8 ÷ 4.33). On a 12-month lease, that is about 15.4% off the year's rent if you get all of it. Ask the leasing office which special applies to the exact unit and lease length you want, and get the amount written in the lease. The Lowball extension flags specials worded "up to" so you check before you count on them.
What should you ask for at renewal?
Ask for one of two things. The first is the same concession again: another free month, or the same dollars off, on the new lease. The second is a lower base rent, set at or near what you actually paid. A lower base is usually worth more if you plan to stay, because next year's increase is calculated from it. Either way, put the numbers in writing: what you paid this year, what the renewal asks, and the percentage difference between them. Landlords also weigh the cost of a vacant unit and a turnover, so a tenant who pays on time has a reasonable case. Results vary and the landlord can say no. For how to make the ask, see how to negotiate rent.
Refreshed 2026-10-30. Arithmetic on this page is shown in full; the comparison table is illustrative. Figures are estimates, not advice.