According to research from TransUnion’s tenant and employment screening business, six out of 10 (60%) property managers reported having experienced fraud in the past two years. Of that share, 38% of property managers did not identify the fraud until after the applicant moved in as reported in TransUnion’s Multifamily Report: Fraud Continues to Be a Growing Threat.
“Once fraudsters become residents, the dangers and damages only compound,” said Maitri Johnson, SVP 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.”
Uncovering types of fraud
For the report, TransUnion looked into the tactics utilized by fraudsters in deceiving managers of rental properties, including:
- First-party fraud: Using another person’s identity with their knowledge and/or permission. For example, an applicant might have bad credit and skipped from a prior lease. To hide this negative information, they’ll use a friend’s identity who has high wages and a stellar rental history.
- Third-party fraud: Stealing an identity from an unsuspecting victim without their permission. Third-party fraudsters present legitimate bank statements and wage documents using identities stolen from victims.
- Synthetic identity: Stealing more than one identity to nurture and create a new one. In this type of fraud, criminals fabricate an identity using data from multiple individuals, piecing together a mix of stolen identities and fake data over time to build a new, phony identity.
Managing a rise in cases
TransUnion’s report found 43% of property managers saw increased evictions due to fraud, with 27% of these tenants having had increased bad debt and other financial losses.
Property managers appear almost evenly split with their approaches to mitigating fraud risk with 34% resorting to outsourced services and technologies, while 25% of property managers utilize in-house services to manually detect fraud. However, one-third did not use any formal tools but, instead, only relied 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.
“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,” added Johnson.
For the report, TransUnion conducted a survey of 98 property managers between October 23, 2023-November 17, 2023 via email through an online research platform. The sample includes property managers who oversee a variety of housing types, number of units, and locations. These research results are unweighted and statistically significant at a 95% confidence level within ±9.9 percentage points based on calculated error margin. Please note some chart percentages may not add up to 100% due to rounding or multiple answers being accepted.
Click here to access TransUnion’s Multifamily Report: Fraud Continues to Be a Growing Threat.
