Tenant Screening Tools Are Helping Corporate Landlords Reduce Fraud Loss

Wednesday, February 19, 2025

• Screening scams: Multifamily REITs are leveraging AI-driven fraud prevention to reduce bad debt, improve retention, and combat rising rental fraud.

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Tenant Screening Tools Are Helping Corporate Landlords Reduce Fraud Loss

Over the last few years, there have been a lot of new technologies that have come out to help residential landlords reduce costs. The efficacy of some of these new tools is not always a given but one category of technology, rental fraud prevention, seems to actually be moving the needle for some of the nation’s largest multifamily REITs.

Fraud prevention technology has recently boosted the multifamily industry. Last week, apartment REIT UDR reported strong earnings, with much of its growth attributed to improved retention. The company’s occupancy has remained above 97% this year, and COO Michael Lacy noted that a reduction in rental fraud contributed to this success. “In mid-2024, we implemented AI-based detection measures, process improvements, and credit threshold reviews to enhance our upfront resident screening,” Lacy said. “We have seen the benefits of these efforts in recent bad debt trends, resulting in more favorable quarterly results.”

A similar sentiment was shared by AvalonBay, one of America’s largest multifamily REITs. When asked about the drop in bad debt expenses during the Q&A segment of the earnings call, AvalonBay’s COO Sean Breslin said, “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 the advancement in technology, including AI, have had an important impact on helping landlords reduce rental fraud, it isn’t the only reason that the topic being mentioned on earnings calls. Rental fraud has been on the rise in the last few years. A recent NMHC survey showed that 70.7 percent of landlords saw an increase in fraudulent activity over the last twelve months. An incredible 93.3 percent of the respondents reported experiencing some kind of fraud in the last year and 84.3 percent have said that they have received falsified income or employment documentation.

The undersupply of housing has unfortunately pushed renters to new lows when trying to qualify for housing. With renter protection laws on the rise and more fraud than ever, landlords are turning to technology to identify rental fraud before landlords are stuck with a renter who is unable to pay rent or worse, one that intends to work the system to get free rent until they are finally able to be legally evicted.

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