In a year dominated by economic instability fueled by the COVID-19 pandemic, no industry has been spared from the consequences.
TransUnion asked multifamily industry experts how the pandemic and 2020’s first-of-a-kind rental environment affected their business ― and if they plan to shift operations moving forward.
Will the eviction moratorium change how owners and operators screen applicants?
Tens of millions of renters across the country are trying to do the impossible math of paying rent despite their income disappearing. Many have received some form of financial assistance (government stimulus checks via the CARES act, deferment and forbearance of rent and eviction moratoriums. But without further aid, its delaying the inevitable.
In fact, according to a recent study by the National Council of State Housing Agencies, 66% of renters expressed concerned about eviction within the next six months.
“Credit and payment history will remain incredibly important for decision-making. We anticipate there could be some added regulations put in place due to COVID-19, and we’ll need to watch these closely.”
Executive Vice President, Asset Management
Examining past financial behaviors will help owners and operators determine if a resident is going to pay their rent or not.
To make better decisions for the future, it’s also important to examine applicants’ past behavior which is a good predictor of future patterns.
For example, a screening model that incorporates trended data captures applicant behavior to more accurately determine their future risk of eviction. Using a static credit score only shows a point in time and could mistakenly decline quality residents and approve risky ones.
“Looking at applicants going forward, we’d be more cognizant of credit history they had before the pandemic hit. We’d look at any debt they had to previous landlords before COVID-19.”
President, Bridge Property Management
Are fraudsters are taking advantage of the poor financial environment?
Fraud is nothing new to multifamily. But in an environment of widespread unemployment and workforce transition, fraudsters are finding new tactics to get into units with no intention of ever paying rent. Digital applications and approvals are becoming the norm ― opening the door to a broader range of fraud tactics and opportunities.
For example, 41% of owners and operators discovered fraud after move in, according to the TransUnion Fraud in the Multifamily Industry.
“Applicants who do this kind of thing realize that we’re in an economic situation right now that creates opportunities to apply fraudulently.”
Executive Vice President
A tenant who didn’t have rent in July won’t suddenly have enough to cover three months of rent in September.
Has the work-from-home situation damaged multifamily?
In many cases, productivity hasn’t suffered, prompting businesses to re-think their work environment, allowing more employees to continue working remotely.
“Urban renters wanted the chance to live near work. But now, downtown offices have closed ― potentially permanently. People left for greener pastures.”
Remote workers aren’t limited by having to live close to an office. They’re free to live anywhere. As a Many are moving to the suburbs —less expensive and more space. The shift could easily cause problems for NOI.
“Inside San Francisco, traffic is mostly renters from San Francisco who want to live in other parts of San Francisco. There isn’t much in migration to San Francisco. The number of people swapping units in this market is unprecedented. ”
Senior Vice President
The pandemic’s aftermath is far-reaching and far from over. As the situation evolves, TransUnion continues to monitor the multifamily industry. Every month since May 2020, we conduct our Rental Housing COVID-19 Credit Analysis and Financial Impact study to report on how renter finances are being affected by the pandemic. See the monthly reports.
1 National Council of State Housing Agencies