In today’s world, data is everything. It unlocks impactful insights across industries and within organizations, and the multifamily space is no different. In fact, over the past two years, the multifamily rental industry has seen unprecedented investment in, PropTech solutions that help operators leverage data more effectively. By leveraging data properly, owners and operators have a significant opportunity to improve operations while simultaneously providing enhanced living experiences for tenants. From solutions like real-time water leak sensors to AI-driven marketing, harnessing data has emerged as a method to solving some of the multifamily industry’s biggest challenges.
An area where the power of data has the potential to significantly impact the multifamily space is the growing issues with renter fraud. As identity theft has become more prominent, so has using those stolen identities to lease apartments. Clearly, this introduces many safety and security concerns for multifamily operators, and it is only getting worse. The good news is that understanding the constantly evolving security landscape and leveraging the power of data can help asset managers to protect their dwellings.
Identity Theft is Widespread and Difficult to Police
It seems like every day there is a new catastrophic data breach that everyone hears about. However, for every catastrophic breach, there are hundreds of smaller non-reported breaches. These “personally identifiable information” breaches, or PII for short, have released a nearly endless stream of highly sensitive information to groups brokering in stolen identities and credit fraud. McAfee and the Center for Strategic and International Studies (CSIS) recently estimated that cybercrime is costing the global economy $445 billion a year. The number of breaches has increased steadily for years with no signs of slowing down, making this a problem that businesses will have to address as part of their risk analysis in the years ahead.
Identity Theft is Active Nationally in Multifamily
There are an alarming number of people trying to rent apartments under a different name in the multifamily industry—up to 3% in densely developed apartment areas. There are many reasons a new customer would hide their actual identity, and none benefit the apartment owner. In the best-case scenario, the customer is trying to hide bad credit, and at worst they want to hide their real identity or criminal background. According to VantageScore, an estimated 68M Americans are living with bad credit, and with an uncertain long-term job forecast, this problem is tracking in the wrong direction. Executives with an eye towards the next 20 years will want a solid strategy in place to protect assets from unexpected fraud damages.
There are Models and Solutions for Guidance
The multifamily industry is far from being alone as a target for cybercrime. The automotive lending industry is plagued by fraud as they are hit by over $6B in Early Payment Defaults sourced to fraud and the industry has made a concerted effort to guard against loss due to fraud. One of the most interesting FTC regulations guiding the auto lending space are the ‘Red Flag Rules,’ which offer a comprehensive playbook for banking institutions to follow during loan reviews. Cybersecurity strategies can look to other industries for ideas while tailoring plans to the unique restrictions of FHA.
This same kind of fail-safes can and should be adopted by the real estate industry as well. The definition of “lending institutions” is rather broad and includes: “any other person that, directly or indirectly, holds a transaction account belonging to a consumer.” The death is in the definition in legalese so just to be sure I looked up the guidance for “transaction account.” It means “a deposit or account on which the depositor or account holder is permitted to make withdrawals by negotiable or transferable instrument.” In other words, a security deposit.
Identity theft is a huge issue across many industries and the impact on the multifamily space cannot be understated. With potential repercussions in financial loss as well as safety and security concerns, it is critical for multifamily owners and operators to verify the identity of potential tenants at every opportunity and data allows for this to be a reality. As evolved as the fraud landscape is, data allows asset managers to be better prepared against it than ever before.