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Business Observer Tuesday, Jul. 26, 2022 1 week ago

Report: As rent and demand for apartments rise, so does fraud

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Survey finds property managers are seeing more and more lease applications that include false information and fraudulent documents.
by: Louis Llovio Commercial Real Estate Editor

While the demand for apartments and the cost of rent have been rising at alarming rates, so has fraud.

According to the 2022 Snappt State of Apartment Tenant Screening Survey, 85% of property managers nationwide say they have been targeted by fraudsters, up from 66% before the pandemic. These managers reported that at least 12.5% of applications, one out of eight, included some sort of altered documentation, whether it be a paycheck stub, ID or bank statement.

Snappt is a Los Angeles real estate technology company specializing in fraud detection technology used by property managers. The company, in the report, estimates more than 11 million fraudulent applications were filed last year.

The big issue with fraudulent applications is that applicants who otherwise would not qualify for an apartment get approved, increasing the chances for an eviction and, in turn, costing property owners thousands of dollars, according to the survey. The survey says that the 3.7 million evictions filed every year cost an average of $7,500.

One Tampa-based property management company is quoted in subsequent report "Targeting the High Costs of Apartment Application Fraud" as saying the problem with altered documentation is even worse than the 12.5%.

Rachel Palmer, the chief administrative officer at American Landmark Apartments, says 40% of the applications she sees include some form of altered documentation.

“A lot of them are fake paystubs,” says Palmer. “You can Google ‘fake pay stubs’ and for $10 create your own.”

Palmer says in the report that catching potential renters who provide fraudulent documentation can, given an average monthly rent of $1,500, put $21 million in revenue at risk each month. “It’s not pocket change.”

American Landmark, according to its website, owns 103 properties nationwide

But suspecting fraud and then identifying it isn’t always simple, and property managers worry about violating fair housing and fair credit requirements.

According to the report, one unidentified manager at a company with 50 communities says proving something is fraudulent takes great care and that the company tries to mitigate the risk. “If they can’t provide a valid paystub, we require either a tax return or bank statements that show they have substantial income,” this manager says.

“But anything outside of that, you open yourself up for some kind of discrimination lawsuit these days.”

(Courtesy of reportĀ "Targeting the High Costs of Apartment Application Fraud")

In addition to fraud, 73% of property managers say late rental payments are extremely common; 66% say finding units damaged is common; 61% say tenants that have stopped paying rent or are just paying partial payments is extremely common; and 52% say disruptive tenants are extremely common.

And the reasons for these issues and for the fraud? According to the report, 85% of property managers blame fraud in our society; 85% blame the ease of finding false documents online; 75% blame higher rents are pressuring applicants to “stretch” the truth; 75% blame eviction moratoriums; and 66% blame less in person contact.

Snappt surveyed 230 institutional property managers nationwide, 40% of who manage more than 10,000 units. All those surveyed focus on the application process in their jobs, with 84% of respondents leading at team charged with qualifying rental applications.

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