The Real Cost of Fraud for Multifamily Owners

Let’s be real: fraud in the rental market is getting out of control. Across the country, property owners and managers are feeling the impact. Imagine this—you’ve got "residents" who don’t actually exist, falsified pay stubs, and identity thefts all happening at once. And the worst part? It’s happening at an alarming rate. In the last year alone, 93% of housing providers have reported dealing with fraud in their properties. That’s nearly all of them!

Now, if you own or manage multifamily projects, this should grab your attention. Because fraud isn’t just a problem—it’s a big financial hit. The paperwork, the legal fees, the lost rent—it all adds up, and at a cost to you, the property developer. Seems unfair, because it is. This week, we're breaking down the NHMC Report on multifamily renter fraud, and how owner/stakeholders can prevent fraud onsite. 

Faking it Until They Make it: The Many Faces of Rental Fraud

Let’s break it down. The most common types of fraud aren’t just people lying about their salary. It goes way deeper than that. We’re talking about almost 85% of site teams seeing applicants using faking pay stubs, references, or other income documents. But that’s not where it stops. Identity theft is huge, with 70% of property managers saying they’ve come across people using stolen identities or even fake IDs to rent out properties. And then there’s the subletting without permission, illegal roommates sneaking in—more than 67% of owners have had to deal with that mess​.

It’s almost like an organized system of fraud out there, and it’s wreaking havoc on multifamily real estate. These aren’t just little hiccups in the system—this is full-blown fraud that’s impacting the bottom line.

And it’s growing. In the past 12 months alone, 70% of housing providers saw an increase in fraudulent applications. In some areas, it’s like a tidal wave. Places like Atlanta, Texas, and Florida are hot zones for this stuff. There, fraudulent activity is so bad that some owners are seeing a 40% increase year over year​. You’ve got to have your eyes wide open if you’re working in those markets.

Eviction Moratoriums and the Financial Nightmare

Here’s where things get worse. Remember the eviction moratorium during the pandemic? Well, that decision caused a ripple effect that’s still being felt today. According to a recent survey, 73% of housing providers said the moratorium made it harder to get rid of nonpaying tenants. Now combine that with the fraud, and you’ve got a serious problem​.

Fraudulent tenants are getting into apartments, not paying rent, and because of the moratorium, they stayed there rent-free for months. Almost 24% of eviction filings are tied to people who got in through fraudulent applications. Imagine how much money that’s costing owners and operators, not to mention the time wasted in court just to get your apartment home back​.

Bad Debt is Bleeding the Industry Dry

This all leads to one thing: bad debt. 

In the last year, multifamily operators wrote off an average of $4.2 million in bad debt. Think about that for a second—$4.2 million in losses. And about 25% of that can be directly tied to fraud​. That’s millions of dollars down the drain because someone faked a paycheck or stole an identity.

If you’re in this game, you know how hard it is to fill a vacancies in over saturated markets, but imagine filling it, thinking you’re good, and then finding out six months later that the "neighbor" isn’t real—or worse, they’re real but never had any intention of paying. Suddenly, you’re not just dealing with vacancy loss—you’ve got legal fees, repair costs, and months of unpaid rent. And it’s not just happening once; it’s happening over and over​, sometimes by repeat offenders. 

What’s the Solution?

So, where do we go from here? Multifamily owners and operators need to get ahead of this fraud wave. The old-school methods of checking references or glancing at a pay stub just won’t cut it anymore. This is where technology has to step in. Advanced screening tools, biometric ID verification, and AI-driven fraud detection aren’t just “nice-to-haves”—they’re essential if we’re going to protect our properties and profits.

But it’s not just about prop-tech. It’s about being proactive in the market. If you’re in the hot zones like Atlanta, Florida, or Texas, that statistically are being impacted the most, you’ve got to double down on your fraud prevention strategies. Work with local authorities, invest in iron-clad screening processes, and don’t be afraid to turn down an application that's flagged by your system. Trust your gut, follow protocol, stay consistent, and more importantly, ask for help if you're unsure of what your next course of action should be so as to remain as compliant as possible​.

The Big Picture: Why This Matters

At the end of the day, this isn’t just a headache for property managers—it’s a wake-up call for the entire industry. Rental fraud is here, it's getting worse, and it’s not going away anytime soon. If you’re not paying attention, it’s going to eat into your profits, your time, and your business.

We’re in a digital age, and with that comes digital fraud. If we don’t start treating this like the massive problem it is, we’re going to see even bigger losses in the years to come. Multifamily real estate is one of the most lucrative markets out there, but only if we stay one step ahead of these bad actors. Fraud doesn’t have to make it through the front door—we can get smarter, faster, and more efficient.