As Landlords Embrace Online Rental Applications, Fraud Spikes

November 11, 2020

The rental industry has increased its use of online rental applications to make leasing more contactless during the pandemic, but it has led to a sharp increase in rental fraud. A credit reporting agency is warning property managers and landlords that they may be at higher risk.

A new survey from TransUnion of 82 multifamily executives shows that the frequency of fraud incidents has climbed by nearly 50% since the start of the pandemic. The majority say they were able to identify the fraud before the tenant moved in. However, 41% say they missed any red flags, and the applicant moved in.

Most of the fraud involved the tenant misrepresenting their identity, such as by using someone else’s driver’s license or assuming a fictitious identity (known as synthetic fraud).

The TransUnion report also shows that the percentage of fraud triggers detected has jumped nearly 30% from March to August. These fraud triggers include applicant statuses with failed authentication or that are flagged high risk for various reasons. A year ago, TransUnion reported these fraud triggers on online applications stood at 10.3%, but in August that percentage jumped to 15.2%.

Some property managers are taking action. Since the pandemic began, 22% of executives say they’ve added an identity verification or fraud solution to help flag possible fraud in rental applications.

“Fraud continues to be an increasingly concerning issue in the multifamily industry for the last several years, and the COVID-19 pandemic-driven shift to virtual leasing has pushed this concern to the forefront for property managers,” says Maitri Johnson, vice president of TransUnion tenant and employment business. “It is imperative that management companies take the necessary precautions and protect their business against the economic impacts brought on by the current environment, as well as the increased propensity for fraud that may not be easily evident today.”