Sign of the times: Steep decline in renter quality
FOR IMMEDIATE RELEASE
One third more active renters in last six months have faced eviction
MOUNTAIN VIEW, Calif. -– Landlords using On-Site.com to qualify new renters have seen a marked increase in applicants with serious problems paying the rent. In the last 3 months, compared to the year prior, 31.8 percent more applicants to rental housing screened by On-Site had been evicted or left a landlord owing money. And preliminary figures from 2009 paint an even bleaker picture.
As the depths of the nation’s economic crisis become clear, the quality of applicants to rental apartments showed a sharp decline in the third and fourth quarters of 2008, On-Site’s figures say. On-Site.com, one of the largest resident-screening services in the country, evaluates renters before they lease an apartment; industry statistics suggest that over half of renters with an eviction record will be evicted again in the future.
On-Site’s figures, which report nationally on more than 100,000 applications per month, show that in the last six months of 2008, the number of rental housing applicants with a serious landlord delinquency on file shot up dramatically — an increase of 22.9% and 31.8% in Q3 and Q4, respectively, compared to the same quarters from 2007.
These figures focus solely on rental-housing default and do not consider applicants with mortgage foreclosures on file. While the number of applicants with serious mortgage delinquencies has been on the rise, On-Site’s figures suggest that job losses and a slumping economy — not a mass exodus from homeownership — is driving the trend.
"In the winter months we traditionally see a lower overall quality of renter, relative to the rest of the year," noted Jake Harrington, On-Site’s director of business development. "So we compared to a snapshot of the year prior. It’s an unprecedented surge in red-flag behavior."
Landlords utilize resident screening services to evaluate whether they should accept or reject applicants based on public records, credit history and other factors. To evaluate a consumer’s credentials, On-Site typically investigates a consumer’s credit profile and criminal record, as well as a check of landlord/tenant court records from housing courts across the country. The screening system weighs these factors against an apartment community’s risk threshold to determine the recommendation to rent, decline or rent with certain conditions like an increased security deposit.
Multifamily default and eviction information is distinct from the credit scores sold by the credit bureaus, which were developed primarily for use by banks and lenders to determine a consumer’s "creditworthiness," and have never been a perfect fit for screening tenants. Harrington says that it is rental housing performance, and not a credit score, that is most relevant to landlords.
"The most important piece of the puzzle is how the resident has performed on his previous lease," said Harrington. "This information is also the most difficult to access." In addition to records obtained directly from county housing courts, On-Site’s reports incorporate scorecards and reference calls from landlords, debt collections and money judgments initiated by property managers and rental-payment history from RentBureau, a credit bureau specializing in the multifamily industry.
"Resident quality trends are our in-house 'economic indicator' and it certainly paints the picture of a distressed pool of renters." Harrington noted, adding that January’s numbers are on track for an even sharper increase in screenings with negative rental information – with 48 percent more screenings with landlord delinquencies compared to a year ago.
"With a surge in active renters out there with this sort of severe problem in their recent past, it is more important than ever for landlords to conduct a thorough review of their credentials. A credit score doesn’t cut it."