Unemployment rates are still in the double digits. Federal unemployment benefits from the CARES act have expired, and talks amongst a divided legislator have stalled. Many Americans may soon be struggling to afford rent. This is coming at a time when the federal eviction moratorium that had been put in place to protect people during this difficult time is also soon ending. A large part of the nation is in a vulnerable position, looking for alternative means to stay afloat and stay in their homes. Landlords are also in trouble as they need to collect rent in order to pay for their expenses and debt obligations. Many feel like there are very few options as they are dealing with tenants who simply cannot afford to continue their leases or who need an alternative way to structure payments.
No landlord wants to deal with the eviction process or have to kick someone out just as no tenant wishes to be forced out of their home because they cannot pay on time, but these are very real possibilities and likely some of the inevitable consequences of the pandemic’s effects on the economy. Yet this is not the nation’s first economic downturn nor the last. There have always been times throughout history where large portions of the population struggle financially to make ends meet, including meeting basic needs.
Coming to terms on payment
Shelter is a basic human need, arguably the most important. Finding ways to ensure that renters stay in their homes, especially during these uncertain times, is one of the most important issues affecting the property industry today. Luckily, there are a number of technologies that are empowering renters at a time when they need it the most. One of those companies is NestEgg, a platform that decouples when a landlord gets paid from when a tenant pays and gives tenants flexible payment terms. During a recent conversation I had with NestEgg CEO and co-founder Eachan Fletcher, he said something to me that really hit home: People understand how important shelter is, and they want to pay their rent. The arrangement that his company creates allows tenants to pay anytime throughout the month while still ensuring landlords collect their money by the time rent is due, helping keep people in their homes and keep landlords solvent.
Most tenants are not trying to avoid paying rent altogether. They are simply struggling at the point in time where they have few options to come up with the payment in full. “People are saying, ‘if I could just have a couple more weeks, I can make it work. If I could make a couple of installments, I could do it,’ or ‘if I could pay half from my bank account and put half of my credit card, I can make it work,’” explained Fletcher. In most cases, tenants who are struggling financially are asking for some sort of modification to the payment that allows them to pay on a schedule or through a payment method that is more accommodating to their financial needs. This is where technologies like NestEgg can help alleviate some of this budgetary pressure.
Most landlords do not have the flexibility or the cash on hand to accommodate this kind of arrangement on their own. Fletcher said that when you take away the adversarial relationship between tenants and landlords, when you take away deadlines and penalties, tenants “are way more likely to pay and pay on time because it allows them to take control of their finances.” In addition to automating rent collection, NestEgg allows landlords to automatically deduct property repairs and maintenance costs from future rental income, divided over several months to help minimize the burden of one large lump sum. “And that does for landlords the same thing we’re doing for tenants. It allows them to meet their expenses on a schedule that aligns with how their rental income is coming in,” said Fletcher. This type of technological innovation is one way to alleviate financial burdens for both tenants and landlords.
Even with more flexibility though, some tenants may simply no longer be able to afford their current rent payments indefinitely. To help tenants get out of leases that they can’t afford, Flip provides a way for tenants to sublet their apartments through an easy, online platform. Flip CEO and founder Susannah Vila explained to me how “traditional rental lease terms almost never fit with how people live their lives. People have break-ups, they change jobs, they graduate from school, and most of these things don’t happen to coincide with when their lease is up.” Tenants who cannot afford their rent and choose to sublet are then able to move someplace cheaper, move in with family or friends, or possibly find a roommate to help cover costs.
Vila’s goal when founding Flip was to help solve more problems for renters and consumers, as most technology tends to be geared towards landlord’s pain points, but inevitably, this technology also helps landlords by making the subletting process much smoother through the platform’s tenant vetting process. Renters looking to sublet provide the list of requirements for that building, so any applicants are vetted ahead of time. Once the application is approved by the landlord, Flip handles the rest of the subleasing process.
Flip also empowers landlords by making the in-person property viewing process much easier (and more successful) through their contactless viewing solution. Landlords are sent a smart keybox that ensures access is “controlled in a fine-tuned way,” explained Vila. Prospects can view the property once they have been approved and verified by Flip, making the leasing process that much easier, safer, and more successful. In fact, Vila shared some recent data that shows self-guided viewings double lead to lease conversions for landlords.
Generally, tenants looking for a new place to live have to rely on landlords for any information about their new homes, but this is changing too. “Renters are just playing musical chairs,” said Nick Dazé, co-founder and CEO of PocketList. PocketList is helping renters understand more about buildings by crowdsourcing information about each unit from the people who have lived there already. “The realization that we had was that a renter that is leaving a place knows everything about it, the noise, the landlord’s behavior, the light, that info is really valuable,” Dazé said. By providing a way for renters to tell when they plan on leaving a unit and as well as some qualities of the unit itself, PocketList has the ability to show listings long before they go on the actual rental market.
This can also be beneficial for landlords, at least the responsible ones. The earlier that the market knows about a listing, the less vacancy they will likely have. Also, the information given by former tenants has a level of credibility that no marketing material will ever be able to achieve. By giving tenants the power to broadcast information about a unit, landlords can effectively multiply the reach of their “word of mouth” advertising.
Landlords often get put into one large bucket but it is important to remember that most of the landlords in the country are not large institutional investors. The vast majority of properties, nearly 75 percent, are not backed by large corporations but instead are run by the mom and pop operationsof roughly twelve million independent landlords who often invest using their own personal finances. These small owners are the ones that are disproportionately dealing with the financial trouble that the pandemic has brought upon many of us. “Mom and pop investors own the square footage and small multifamily buildings in neighborhoods, and these are the places that lower income people are far more likely to live. These tenants are not in luxury downtown high rises, which are all owned by the institutional investors,” Fletcher told me. This makes independent landlords especially vulnerable to missed rent payments and makes them even greater beneficiaries of the ways in which technology can help maintain good tenant relationships.
In a perfect world, every tenant would be able to stay their entire lease and pay their rent on time. But if the last few months has taught us anything it is that we do not live in anything close to a perfect world. Despite all of the trouble that we have seen and are likely to continue seeing, both tenants and landlords want the same thing—for rent to be paid on time. A little flexibility will go a long way when it comes to accommodating tenants’ financial needs and ensuring people can afford the most basic of human needs. Technology that enables flexibility and empowers tenants will continue to help both tenants and the landlords that they rent from.