Apartment rents in metros across the country are hitting peak levels. While the extreme increases have been good news for may investors, they have also lead to a rise in eviction rates, leaving some landlords with significant losses in rental revenue. A new service from the AAOAaims to help landlords hedge against rent loss. LeaseGuarantee will reimburse landlords up to $10,000 for unpaid rents and eviction costs. It also promises to speed leasing activity by covering a portion of move-in costs for tenants. To find out more about the increase in eviction rates, how tenants have been impacted and how this new service can help, we sat down with Jeff Cronrod of AAOA for an exclusive interview.
GlobeSt.com: Why are tenant eviction rates rising?
Jeff Cronrod: The housing shortage in some communities has driven rents past a point of affordability for many. More tenants are stretching beyond an appropriate rent to income ratio in order to get into a rental. Rent control has also played a role in driving rents higher as landlords push rent on vacant units higher to offset long-term residents benefiting from below market rents. Additionally, we have seen some landlords taking traditionally long term rental units off the market in order to offer them on sites like Airbnb at higher daily rates than they could normally get. Along with other local and regional economic issues, these causes create a perfect storm to accelerate the eviction rate.
GlobeSt.com: Which US markets have the largest number of tenants struggling to pay rent, and why?
Cronrod: Both Redfin and CityLab have recently done extensive reporting on where the eviction rate is worse. Generally, economically troubled areas, minority neighborhoods and areas with a lower education rate tend to have the higher eviction rate. Specifically, Camden, New Jersey, North Las Vegas, Nevada, Memphis, Tennessee and Phoenix, Arizona were mentioned as well as several others as leaders in the United States.
GlobeSt.com: Rising rents are obviously a burden for tenants. How are they also impacting landlords?
Cronrod: Rising rents contribute to evictions and landlords don’t want evictions. Landlords are forced to increase rents to cover increase in expenses; from higher interest rates on debt to increases in taxes, insurance, maintenance and energy, a landlord is often forced to increase rents to stay in business. Frequently, as rents increase a landlord’s bottom line shrinks. The challenge of finding qualified tenants increases as rents go up.
GlobeSt.com: You’ve developed a solution to this issue. Tell me about LeaseGuarantee and how it helps.
Cronrod: LeaseGuarantee essentially is a corporate co-signer that is fully integrated into the tenant screening process. Available only through your tenant-screening provider, LeaseGuarantee will cover the landlord for up to $10,000 of loss due to non-payment of rent and/or property damage as well as legal costs. While protecting a landlord from losses, LeaseGuarantee helps an applicant qualify for a rental. If the applicant has credit issues or is required to have a co-signer, LeaseGuarantee may be accepted by most landlords to help bridge the gap. Additionally, an applicant that may have difficulty arranging for all of the move in money, may be able to use LeaseGuarantee to reduce or eliminate a security deposit.
GlobeSt.com: In addition to rents, how does the program also help fill vacancies?
Cronrod: The biggest expense facing a landlord is a vacancy. An empty unit produces no income but expenses continue. LeaseGuarantee helps fill vacancies faster by allowing a tenant with marginal credit or one that does not have all of the move in money, to be approved quickly. A landlord offering LeaseGuarantee has a significant competitive advantage over other landlords with vacancies in the neighborhood. As a perspective tenant considers vacancies in the area and sees that one has a lower move in cost or a more lenient review policy, more applicants will naturally flock to a LeaseGuarantee unit.
GlobeSt.com: What has been the reaction from landlords?
Cronrod: Extremely positive. In our initial launch in January to a small group of independent landlords, the reaction was overwhelmingly positive. In phone surveys, we received no negative feedback and online we are seeing the same landlords offering LeaseGuarantee to every applicant. LeaseGuarantee is absolutely something that will be helpful to all landlords and applicants nationwide.