Renter fraud continues to be on the rise in the multifamily industry. In a proprietary study of over 400 property management professionals in five major multifamily markets, RealPage delved into the complexity of rental application fraud, the industry’s successes and failures in prevention and technology adoption, and the bottom-line impact.
“The most alarming surprise in the nationwide findings from 402 multifamily professionals isn’t that 75% saw more rental fraud in the past year. The real eye-opener is how much more organized, diverse, and difficult to discover the fraud is—resulting in extended damage to revenue, reputation, and residents,” said Josh Albrechtsen, RealPage senior vice president and general manager of the Front Office platform.
While 97% of respondents said reducing renter fraud is a top priority for their firms, only 17% cited having portfoliowide fraud prevention initiatives. In addition, only 22% said they have formal metrics for tracking rental fraud and its business impact. Nearly three-quarters of respondents, 73%, said more than half of rental fraud is found after residents move in.
Organized fraud rings and the wide availability of fake documents online are hindering multifamily professionals. Over 50% of the respondents reported seeing diverse types of fake identity, income fraud, or approval errors. This includes 58% who cited fake or manipulated identities, followed by misrepresented income, 57%; identity theft, 53%; and site staff pushing through unqualified candidates, 51%.
According to RealPage, the survey also revealed how bad for business rental fraud is, with 86% of respondents believing it reduces income and/or increases costs by at least 10%. For companies with basic validation solutions, the financial impact is much higher. Over half, 55%, reported damage to a property, and 51% cited reputation harm. In addition, 49% reported fraud impact via criminal activity in a unit, while 47% cited the cost of eviction or early lease termination.
Many barriers—the difficulty of managing inconsistent processes and standards for each property, the pressure to maintain occupancy, and employees not understanding the signs of fraudulent activity—also are standing in the way for firms trying to reduce rental fraud.
While most of the respondents noted they train employees to identify fraud, 43% said their site staff members are not financially motivated to prevent it. In addition, 41% said too many people can override decisions to reject applications, and 22% cited the potential to be perceived as discriminatory.
More mature tools also are aiding in better fraud reduction outcomes, with 92% of respondents agreeing that anti-fraud technology is the only way to reduce the problem effectively. Financial verification and background/credit checks are the most frequently used screening solutions, according to respondents.
“Rental fraud has become increasingly sophisticated, and our customers need new and better tools to address the threat across their portfolio,” added Albrechtsen. “To help leasing staff make the best-informed decisions and enable a corporate office to set and enforce policy, visibility and transparency of assessment details are essential. With fraud coming from multiple directions, effective solutions must offer multifaceted verification across data, device, document, and biometrics, leveraging artificial intelligence and machine learning.”
