Dive Brief:
- Three-fourths of multifamily operators have seen rising cases of rental fraud within their portfolios over the last 12 months, according to a survey from multifamily software and data provider RealPage.
- More than half of respondents attribute this rise in fraud to organized groups taking advantage of gaps in properties’ fraud protection. Fake or manipulated identities, misrepresented income and identity theft were the most common types of renter fraud.
- Almost all participants — 97% — reported that preventing renter fraud was a top priority at their companies. However, only 17% had a portfolio-wide fraud prevention initiative in place, and 22% had metrics in place for tracking rental fraud. Over 70% of respondents said they do not detect most rental fraud until after the residents have moved in.
Dive Insight:
Application fraud has been a long-standing concern for property managers, and the tools used to carry it out are only growing more complex with time.
“[Organized groups] are increasingly exploiting digital platforms to share and access detailed "how-to" guides, which outline methods for creating fake identities,” Josh Albrechtsen, RealPage senior vice president and general manager, front office, told Multifamily Dive. “For instance, we've seen a rise in the use of synthetic identities, where fraudsters combine real and fabricated information to create entirely new identities that are difficult to trace.”
While tech solutions, document verification and background or credit checks offer the best way forward for some companies, laws in places like California, New Jersey, Seattle and New York City restrict searches on criminal background or evictions, stopping how deep managers can dig.
Most employers in the survey say they train their employees to recognize renter fraud, but a little under half — 43% — say their employees have no financial incentive to prevent it. Over half (51%) had experienced site staff approving unqualified candidates.
How has fraud impacted multifamily properties?
| Share of respondents | Reported impact |
|---|---|
| 77% | Reduced income/increased costs by 10-20% |
| 55% | Damage to property |
| 51% | Harm to the respondent’s business reputation |
| 49% | Criminal activity in fraudulently leased units |
| 47% | Extra costs associated with early lease termination/eviction |
| 42% | Loss of good tenants due to bad behavior from fraudulent renters |
SOURCE: RealPage
The most common barriers operators face in preventing rental fraud are issues with managing different application standards across multiple properties, pressure to maintain occupancy and employees not understanding signs of rental fraud. Centralized roles report different challenges, including too many people authorized to override rejection decisions and the fear of being perceived as discriminatory.
RealPage and Sunnyvale, California-based Dimensional Research conducted the survey in January of 402 property managers responsible for 10,000 or more units in five of the largest multifamily markets in the U.S.: Atlanta, Houston, Los Angeles, Miami and Seattle.
