RealPage released its 2024 National Multifamily Fraud Research Study: Uncovering the Impact of Rental Application Fraud in Multifamily this month. The study reveals portfolio-wide gaps in leasing fraud protection, with 75 percent of study participants reporting an increase in fraudulent leasing activity over the past year.
The study participant group of 400 property management companies in five major markets confirmed RealPage’s long-held beliefs about the cause of rising leasing fraud. It provides evidence that no multifamily community is immune to fraudsters and their ever more organized and sophisticated tactics.
“(Rental fraud) went from a single person trying to hide something about their background, credit or criminal eviction to organized groups of fraudsters that actively target properties,” said Ed Tonarelli, RealPage industry principal.
Using a range of sophisticated deceptive practices to obtain a lease, organized fraud rings are targeting properties across the nation at all stages of the rental process. According to 77 percent of study respondents, these incidents of fraud are reducing property income and increasing costs by more than 10 percent to 20 percent.
More than 50 percent of respondents reported seeing diverse types of fake identity, income fraud or approval errors, including 58 percent who cited fake or manipulated identities, 57 percent who reported misrepresented income, 53 percent who reported identity theft and 51 percent who reported site staff actually pushing through unqualified candidates. And, while apartment operators report challenges managing inconsistent processes and standards, only 43 percent of site staff are financially motivated to prevent fraud.
Rental fraud not only results in significant income losses and cost increases, fraudsters often cause damage to actual property and harm to a community’s reputation. Almost three quarters of respondents (73 percent) claim that more than half of rental fraud isn’t even detected until residents move in, after which it can take six months or more to evict. Meanwhile, many fraudsters commit crimes on the property, stealing from neighbors and driving honest renters to search for safer homes elsewhere.
Social media is a major factor driving the trend by providing ways to exploit gaps in communities’ fraud protection. Despite the severity of the issue, only 17 percent of multifamily companies have an advanced fraud prevention initiative in place. And, although 97 percent state that reducing fraud is a top priority, only 22 percent of respondents have formal metrics for tracking rental application fraud.
The evolution of fraud tactics emphasizes the importance of robust prevention tools and stringent eviction laws to combat these growing incidents of fraudulent rental activity.
RealPage’s OneSite and OnSite leasing and property management platforms using technology from financial data network Plaid, recently debuted a number of automated tools to help combat organized fraud schemes by verifying identities early in the application process, ideally before move-in.
The RealPage study can be accessed here: https://www.realpage.com/ebooks/uncovering-impact-of-rental-application-fraud/58aabc2a-eba3-11ee-b189-005056ae66af/?showPdf=true
