You are reading: COVID-19 and Effects on Financial and Rental Application Fraud
In this article
It’s no secret that the COVID-19 pandemic significantly impacted the rental market, and rental application fraud is no exception. According to a report by TransUnion, there has been a surge in rental application fraud since the start of the pandemic. The study found that in the first quarter of 2020, the incidence of rental application fraud was 3.2%, up from 1.8% in the same period the previous year. Yikes!
Additionally, the report found that fraudsters are increasingly using stolen identities, fake employment information, and fraudulent documentation during the pandemic to apply for rental properties. This trend highlights the importance of thorough tenant screening to prevent rental application fraud and safeguard your rental property business.
While these new trends may be cause for concern, there are proactive measures you can take to protect your property better. In this article, we’ll review how the COVID-19 pandemic shifted the rental industry and how you can combat these changes.
The Initial Impact of COVID-19
Unprecedented financial pressures can create massive opportunities for individuals to misrepresent information for personal financial gain, qualify for things they otherwise would not, or steal from taxpayers, businesses, and governments. The residential industry is just one that has seen significant increases in instances of fraud.
In February 2020, Snappt published a survey that detailed how prevalent financial document fraud had become. In that report, we showed that roughly one in six applications for residential rentals exhibited some type of application fraud (altered bank statements, fake pay stubs, etc.).
Soon after, COVID-19 swept the nation. Government lockdowns led to widespread unemployment. At Snappt, we saw an immediate uptick in applications containing fraudulent financial information.
We were curious if this was evidence of a broader trend, so we sent out another survey – the same questions with a few new ones at the end. This time, we surveyed both property managers and renters. The 100 property managers either managed or were directly involved with evaluating rental applications.
The 120 renters we surveyed were made up of the following groups:
- Millennials, Gen-Xers, Boomers, and the Silent Generation
- Geographically distributed across the United States
- They were all renting apartments or townhouses (we did not survey renters of single-family homes)
Property managers report that nearly 29% of rental applications were now exhibiting application fraud—nearly double since before the pandemic hit. The problem was widespread: 85% of all property managers reported being victims of application fraud, up from 66% before the pandemic.
The fraudsters are upping their game. Pre-pandemic, property managers felt just one in 10 fraudulently altered applications went through undetected; they now say one in four application fraud attacks is undetected.
None of this surprised us at Snappt. We saw an uptick in fraudulent financial documentation within applications as early as March 2020. While Snappt’s customers saw elevated financial document application fraud rates, they were not yet seeing higher evictions. They caught the fraudsters during the application phase and prevented them from getting in.
Lasting Impacts: 2023 and Onward
“The increasing number of self-employed applicants, a move to online rental applications, and the increasing availability of tools to fraudulently alter financial documentation all make the problem more common, ”said Daniel Berlind, CEO and co-founder of Snappt, of the rise in application fraud.
COVID-19 created a heightened atmosphere that bred desperate renters. Many states had eviction moratoriums lasting well into 2021, preventing tenants from being evicted for almost any reason. In turn, this led to an increase in confidence on their part. If they could sneak their fake documents through the screening process, they wouldn’t be able to be kicked out of their unit.
As a result, they learned how to alter their documents in new ways, many of which were almost impossible to see with the naked eye. As the demand for these fraudulent documents increased, shady companies that would provide this service for a small fee started popping up. Do a quick Google search, and you’ll see that over half of the results on the first page consist of these companies.
COVID-19 also had a significant impact on the rental market. Initially, rents dropped across the country. With so many tenants moving in with friends and family, vacancies rose. Apartment complexes had to lower rent prices to fill their units.
But once that initial wave of panic and chaos died down, demand began to rise again. Rents not only rebounded but skyrocketed. While this was great for property managers, it took a toll on tenants. How were they going to afford their rent now? Some were still unemployed or struggling to find stability due to the pandemic.
This is where document fraud comes in, yet again. Tenants started feeling like they had no choice but to fabricate documents to prove their income. This is a dangerous game, as it can get them into serious legal trouble if caught. Property managers and landlords have had to become more vigilant in order to prevent fraud and protect themselves against potential liabilities.
What’s the Solution?
More than ever, property managers are turning to technology solutions that can help with tenant screening. Automated tenant screening platforms like Avail, RentPrep, and SmartMove can save you time and stress when creating thorough screening reports. Remember, it’s essential to take the time to review every aspect of these reports. Review the applicant’s credit history, background check results, and employment history to get a good idea of what kind of tenant they will be.
While many property managers already use automated tenant screening software, not everyone has implemented fraud detection software. Snappt’s fraud detection software is state of the art, catching over 99.8% of fake documents and reducing potential future bad debt & evictions by 51%. This saves time and money and provides a layer of security to ensure that only the best tenants are being accepted. Snappt’s fraud detection software is easy to use, cost-effective, and ensures property managers have the correct information when making important decisions.
To Sum Up…
As you can see, COVID-19 has made things interesting in the rental market! With rental application fraud on the rise, staying protected and informed is more important than ever. But don’t worry; with the right tools and a bit of wit and wisdom, you can outsmart even the sneakiest of scammers. So remember always to conduct thorough ID and employment verification, background checks, and stay up-to-date with fair housing laws and regulations. And don’t let the pandemic get you down – whether you’re a landlord or a tenant, plenty of resources are available to help you navigate these challenging times.