Reduce Fraud Loss with Effective Tenant Screening Tools for Corporate Landlords

In recent years, the residential landlord industry has witnessed the emergence of various cost-reducing technologies. While the effectiveness of some of these tools remains uncertain, one area of technology, rental fraud prevention, has proven to be a game-changer for several major multifamily REITs across the nation.

The implementation of fraud prevention technology has significantly contributed to the success of the multifamily industry. UDR, an apartment REIT, recently reported strong earnings, with improved retention being a key driver. The company has maintained an occupancy rate above 97% this year, and according to COO Michael Lacy, a reduction in rental fraud played a role in this achievement. Lacy stated, “In mid-2024, we implemented AI-based detection measures, process improvements, and credit threshold reviews to enhance our upfront resident screening. We have observed the benefits of these efforts in recent improvements in bad debt trends, leading to more favorable quarterly results.”

AvalonBay, one of America’s largest multifamily REITs, echoed a similar sentiment. During the Q&A segment of their earnings call, COO Sean Breslin addressed the decline in bad debt expenses and highlighted the industry’s improved tools for screening out fraudulent applicants. Breslin stated, “There’s always been an element of fraud in the system. I’d say the industry now has much better tools than we ever had pre-COVID to weed that element out—essentially, to screen them out.”

While technological advancements, including AI, have played a crucial role in helping landlords combat rental fraud, it is important to note that the topic is being discussed on earnings calls for more reasons than just technological advancements. Rental fraud has been on the rise in recent years. According to a recent NMHC survey, 70.7 percent of landlords reported an increase in fraudulent activity over the past twelve months. Shockingly, 93.3 percent of respondents experienced some form of fraud in the last year, with 84.3 percent receiving falsified income or employment documentation.

Unfortunately, the housing shortage has pushed renters to desperate measures in order to qualify for housing. With the rise of renter protection laws and an increase in fraud cases, landlords are turning to technology to identify rental fraud before getting stuck with non-paying tenants or individuals who exploit the system to live rent-free until they can be legally evicted.