Some policymakers have suggested taking data away from landlords, property managers, and others, yet data sharing is a key tool to prevent the escalating fraud in the apartment rental marketplace.

A 2021 survey by Entrata found that 55% of property managers have been experiencing rental application or payment every few months with 15% experiencing multiple fraudulent attempts every month. The COVID-19 pandemic has exacerbated the fraud trend.  Data also showed that 5% of apartment applicants could not be approved due to a lack of verifiable identification, which indicates that one of every 20 potential lessees is aiming to circumvent the system.[1]

Lease application fraud tends to fall into two categories: deception intended to improve the tenant’s perceived ability to pay rent and deception intended to hide evidence of past mismanagement of their finances.

Attempts to improve the perceived ability to repay generally take the form of falsified employment records, pay stubs, bank statements, and other documents that create an inflated picture of the applicant’s cash flow and the assets available to pay rent — even if they suffer a financial setback. It’s worth noting that the same technological advances that drive the digital revolution also make it much easier to commit this type of fraud. Even the most basic home computer can provide ample functionality to capture and re-use digital images or to scan and edit documents. As software continues to emphasize ease-of-use, more and more tenants will be able to act on the temptation to engage in this type of behavior.

Hiding evidence of past financial mismanagement is a form of identity fraud that’s common in any industry that relies on a view of past behavior to predict future events. Entities like credit reporting agencies receive account information from lenders and consumer-entities businesses. The effective use of this data relies on the ability to retrieve a complete and accurate history each time the individual provides their identity as part of a tenant, lending, or other application. People with a patchy or unattractive financial history are inclined to manipulate their identities in the hope that the altered information won’t be matched to their negative history.

Consumer reporting agencies and other consumer data aggregators are extremely good at returning complete and accurate information even when identities are manipulated. It’s central to their business and there are extraordinary business and regulatory pressures on them to do this well.

Fraud in the apartment application space has been “insane,” according to a representative of Hanover Company, a large property management operation based in Texas.  A spokesperson for Bozzuto, a property management company in Maryland said that “[t]here has been an enormous uptick in all types of applicant fraud.”  Landlords and property managers are seeing “[f]ake pay stubs, designed to inflate one’s actual earnings, are so prominent that websites are dedicated to them.”  Fraudsters have been applying for apartments in the names of minors, missing persons, and deceased people.  “[W]hen parts of real identities—such as Social Security numbers, address and driver’s license information—are combined with false information. This means a background check can still pass on some occasions.”[2]

More sophisticated apartment rental fraud requires more sophisticated responses.  Solutions include “intuitive tools to authenticate identity, verify bank account information and substantiate the overall suitability of a potential renter.”  The Bozzuto spokesperson said that his company needs to use a combination of “standard screening,” ID verification software, document verification software, and a manual review to cut down on fraud.  A multi-pronged approach is necessary to keep people and property safe because “fraudulent applicants can often bypass some of the checkpoints.”[3]

So, what does work to help reduce apartment fraud?  Among other tools, automated verification of income, assets, and employment, is important. For property managers, automated verification eliminates the need to collect this type of documentation from tenants, which was harder in a pandemic anyway. In addition, automated verification removes the prospective tenant from the delivery process — reducing the possibility that the applicant would be tempted to modify or create their own versions of the documents.

[1] How to Combat the Apartment Industry’s Uptick in Fraud, Rental Housing J., Nov. 2, 2021.

[2] Id.

[3] Id.