Fraud isn't a one‑off problem

Most operators are underestimating how much fraud is getting through their current screening process, even if they think they’ve “tightened things up.” Emerging data suggests that application fraud is now table stakes in multifamily, not an edge case, and that a meaningful share of bad debt, evictions, and operational drag ties back to fraudulent or manipulated applications that slipped through screening. 

Fraud isn’t a one‑off problem

Recent industry surveys show that rental application fraud has become the norm rather than the exception. Nearly all large rental housing providers report encountering fraud in the past year, and many say the volume is still rising. At the same time, document-level analysis indicates that several percent of all applications contain manipulated information, even in portfolios that already use modern screening tools.

What “fraud slipping through” really means

“Fraud slipping through” is any instance where:

• An applicant misrepresents identity, income, employment, or rental history in a way that defeats current screening controls and results in an approved lease.
• Fraud is only detected later (during delinquency, eviction, charge‑off, or collections) or never formally identified at all.

NMHC’s Pulse Survey on fraud found that 93.3% of surveyed rental housing providers experienced some form of fraud in the prior 12 months, including falsified pay stubs, misrepresented application information, and identity fraud. In the same research, more than 70% reported an increase in fraudulent applications and payments over just one year, with respondents citing double‑digit percentage increases.

Traditional approval metrics don’t reveal how many of those “approved” files are actually fraudulent—they only surface as skips, slow‑pay, evictions, or bad debt later.

How big is the problem by the numbers?

NMHC’s national survey found that:

• 84.3% of operators have seen falsified or fabricated income documentation such as pay stubs or employment references.
• 80% observed applicants misrepresenting information directly on applications.
• 70% reported identity theft, fraudulent ID documents, or the use of another individual’s personal information.

Another industry analysis reported that eviction now averages around 20,000 to 25,000 dollars per case, and nearly 24% of eviction filings over three years were linked to tenants who had submitted fraudulent applications. In the same dataset, owners reported roughly 4.2 million dollars in bad debt write‑offs over 12 months, with about 25% of those losses attributed directly to rental application fraud.

A RealPage study of large multifamily operators found that the most frequent fraud patterns included fake or manipulated identities (58%), misrepresented income (57%), and outright identity theft (53%), underscoring how often fraud is sophisticated enough to challenge standard screening.

Taken together, these numbers suggest that somewhere between a few percent and well over 5% of applications in many portfolios include fraudulent elements—and that a measurable portion of charge‑offs and evictions are the downstream result of the fraud that slipped through.

Why fraud is getting harder to catch

Fraud tactics have gone digital and scalable. Industry resources now distinguish between “digital fraud,” which uses manufactured identities, spoofed IP addresses, and card‑testing style techniques to find a viable identity match for rental applications, and “true name fraud,” which leverages stolen personal information that otherwise looks legitimate.

Synthetic identity fraud—where fraudsters blend real and fake data to create a brand‑new identity—is now estimated to represent the majority of identity fraud cases in the broader economy, with apartment operators warned that synthetic profiles are the fastest‑growing threat in rental housing.

AI and low‑cost tools have made it easier to manipulate documents at scale. Document fraud experts report that the most common methods include:

• Purpose‑built PDF creators that generate fake bank statements and pay stubs that visually match common templates.
• Text insertion and editing of real documents to inflate income or change employment details.
• Subtle font and alignment tweaks that are nearly invisible to the human eye but detectable by specialized tools.

When front‑line teams rely primarily on visual document inspection, basic ID checks, or generic credit reports, many of these synthetic and digitally‑enhanced fraud attempts look “good enough” to pass.

The hidden downstream cost of missed fraud

Each fraudulent approval that makes it through typically carries higher odds of early non‑payment, property damage, or eviction, which is why nearly a quarter of recent eviction filings have been tied back to fraudulent applications.

With eviction commonly costing $20,000 to $25,000 dollars when factoring legal fees, lost rent, unit turns, and staff time, even a small number of fraudulent move‑ins per year can erase the profitability of multiple units.

Surveyed owners reported an average of 4.2 million dollars in bad debt write‑offs over a 12‑month period, with about 25% directly linked to rental application fraud—meaning roughly 1 million dollars of bad debt per year, per owner, was preventable fraud loss in that sample.

On top of direct financial loss, operators point to softer impacts: higher staff workload, more confrontational resident interactions, reputational risk when fraud leads to criminal behavior onsite, and pressure to raise rents or fees to cover elevated loss rates.

The fraud that slips past screening is not just a collections problem; it inflates operating costs and contributes to rent pressure for honest residents.

How much fraud is probably slipping through at your properties?

Start with a baseline application fraud rate of 5% to 7%, drawn from document‑level data and industry surveys showing that around 6.4% of applications in one large dataset were fraudulent and that nearly all operators are encountering fraud.

Adjust upward if:

• The portfolio has limited or no automated document fraud detection or identity verification.
• Properties operate in fraud “hot spots” where operators report higher‑than‑average increases in fraud, such as certain major metros and high‑growth Sun Belt markets.
• Leasing teams feel pressure to hit occupancy targets and admit they sometimes “override” screening results or accept questionable documents.

Recognize that not all fraudulent applications are caught, even with tools in place. If only a fraction of the 5% to 7% baseline is identified pre‑move‑in, the remainder becomes fraud that is, by definition, slipping through.

For a 2,000‑unit portfolio with, for example, 3,000 to 4,000 applications per year, even a 3% to 4% “missed fraud” rate could mean 90 to 160 fraudulent move‑ins annually. Multiply that by the 20,000‑plus dollar cost of a serious loss or eviction, and the financial exposure becomes easy for an operator to visualize.

Why better verification matters

Operators need three things to reduce slippage:

• Document‑level intelligence that can detect manipulations invisible to the human eye, rather than relying on visual inspection alone.
• Identity verification that can uncover synthetic, digital, and true‑name fraud patterns in real time, not days later.
• Workflow integration that makes “fraud‑first” decisions easy for leasing teams so they can say yes faster to qualified renters and confidently say no when risk is too high.

Embedding identity verification into the leasing process from day one helps teams spot red flags earlier, keep communities safer, and decrease financial burden in the long run.

Source: Multifamily Insiders