TransUnion Report: As Multifamily Sector Grows, Fraud Follows

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Demand for multifamily properties has soared during the last decade. It’s little surprise, then, that fraudsters, too, were attracted to the apartment market.

How busy have con artists and scammers been? National credit bureau TransUnion says that six out of 10 multifamily property managers experienced fraud in the past two years.

That’s the key finding from new research from TransUnion’s tenant and employment screening business, which recently published its Multifamily Report: Fraud Continues to Be a Growing Threat.

And most concerning? TransUnion said that 38% of surveyed property managers said that they did not identify the fraud until after the applicant moved into an apartment unit.

“Once fraudsters become residents, the dangers and damages only compound,” said Maitri Johnson, senior vice president of TransUnion’s tenant and employment screening business. “Delinquencies and evictions are expensive and take significant time and effort to enact. In the meantime, the other residents might be at risk with fraudsters nearby.”

The TransUnion report also found that 43% of property managers saw increased evictions because of fraud. More than a quarter (27%) suffered increased bad debt and other financial loss.

Property managers appear almost evenly split with their approaches to mitigating fraud risk. About one third (34%) use outsourced services and technologies, while a quarter have in-house employees who manually detect fraud. However, one third do not use any formal tools but instead rely on visual, experience-based risk assessments.

“Those who rely on their instinct, rather than a formal methodology, may put themselves at risk,” said Johnson. “Not only is that not effective for detecting potential fraud—especially as fraudsters become increasingly sophisticated—it also risks denying housing based on the property manager’s biases.”

The report found that even in-house manual risk assessment processes left vulnerabilities to potential fraud. For example, manually scanning driver’s licenses, checking credit scores and verifying employment might not protect against fraudsters using synthetic identities.

Comprehensive, identity-based solutions are powerful in helping defend against rental fraud. Such technologies help detect red flags that indicate fraudulent applicants before they move in. These solutions also streamline the process for legitimate applicants, getting them approved quickly.

“There is no one-size-fits-all approach to solving fraud. Ultimately, multi-layered, identity-based fraud solutions improve the customer experience by creating efficient processes for applicants and protecting residents from would-be fraudulent neighbors,” said Johnson.

Source: RE Journals