Loss-to-lease
Loss-to-lease is the gap between the market rent a home could be let at today and the lower rent its current tenant pays under the existing lease. It is income not yet captured, not cash lost. UK valuers describe the same gap as passing rent against ERV, the valuer's opinion of open-market rent.
What is loss-to-lease?
CRE Daily defines loss to lease as the difference between the rent a property could theoretically collect at current market rates and the contractual rent actually being charged. The usual formula is gross potential rent at market minus scheduled contract rent, shown either as a money amount or as a percentage of gross potential rent. If market rent is $2,000 a month and an existing tenant pays $1,800, the loss to lease on that unit is $200 a month.
When in-place rents sit above the market, the position is called gain-to-lease, the inverse.
The UK vocabulary is different. A valuer compares passing rent, the rent payable at a point in time allowing for lease incentives, with ERV, the valuer's opinion of the open-market rent on the valuation date. A property is over-rented when contracted rent is higher than ERV. The same gap, read from the other side, is the room a landlord has to move rents up.
Why loss-to-lease matters for BTR and single-family rental operators
A fully let scheme can still earn less than it should. Loss-to-lease is the part that occupancy does not show, and it is read from the rent roll. It is where an operator looks first when asking how much income is available without a single new tenant, and it changes the story on NOI and on the value that follows from it.
The gap is closed slowly in England. From 1 May 2026 a landlord may raise rent on an assured tenancy no more than once a year, with at least two months' written notice on Form 4A, and a tenant can refer a proposed increase to the First-tier Tribunal if they consider it above market rate. See Renters' Rights Act. In build to rent and single-family rental, the gap closes at renewal and at the annual increase, so the figure is a planning input and not a number to chase.
Incentives and concessions distort the comparison, because the headline rent is higher than the rent collected. Where they are in play, compare against net effective rent.
In purpose-built student accommodation (PBSA) rents are set again for each academic year at the point of booking, so loss-to-lease is mainly a build to rent and single-family rental measure.
Key takeaways
- Loss-to-lease is market rent minus the rent in place, per home or across a scheme.
- It is uncaptured income and not a cash loss.
- The UK terms are passing rent and ERV; over-rented is the reverse of loss-to-lease.
- In England the gap closes at renewal and at the once-a-year rent increase, which a tenant can challenge at tribunal.
- It is mainly a build to rent and single-family rental measure; student accommodation resets rents each academic year.
How Cloudfox Helps With Loss-to-lease
Loss-to-lease needs two numbers per home: what the tenant pays now and what the home would let for today. Cloudfox connects the property management system to HubSpot through StaySynced, so in-place rent, tenancy end dates and renewal status sit on the record that the leasing team works from. The renewal conversation then starts with the gap in front of the team, and Xero and Syft report the income that results. Find out more at cloudfox.it/what-we-do.
Frequently Asked Questions About Loss-to-lease
Is loss-to-lease a real loss?
No. It is potential income the operator has not yet collected because existing leases are below today's market rent. It does not appear in the accounts as a loss.
How do you calculate loss-to-lease?
Market rent minus the rent in place, for each home, added up across the scheme. Divide by gross potential rent at market to show it as a percentage. Different sources use different bases, so state the base when you quote a figure.
What is gain-to-lease?
The opposite position, where tenants pay more than today's market rent. It is a renewal risk, because a tenant can refer a proposed increase to the tribunal if they consider it above market rate.