According to recent research from the National Apartment Association (NAA) and the National Multifamily Housing Council (NMHC), fraudulent applications, identity manipulation and increasing delinquency rates are creating operational strain and measurable financial and reputational risk for property stakeholders, from property managers to institutional investors. Some people view apartment rental fraud as an industry-specific problem affecting only individual tenants and their landlords, but the impact can be wide-ranging.
Stakeholders include property managers who must respond to incidents of fraud, file criminal charges and evict tenants as needed. These tasks take up considerable time and money. Industry research suggests the losses per incident frequently exceed $10,000, driven by unpaid rent, turnover costs and legal expenses. Furthermore, it is important to note that eviction processes can take six months or longer in some jurisdictions, adding both carrying costs and uncertainty.
Property managers are not the only ones impacted by fraud. Additional stakeholders include pension funds, insurance companies and other large investors, many of which allocate significant capital to real estate assets, seeking stable returns and diversification. When rental fraud and bad debt erode property income, the ripple effects can impact the financial health of these funds.
Fraud can also undermine the value and reliability of investments that support long-term financial security for individuals and communities, and the incidence of fraud continues to rise. More than 70% of respondents to a 2024 NMHC survey reported an increase in fraudulent applications and payments in the preceding 12 months. Additionally, residents and prospective tenants unwittingly and unfairly bear this cost with increased rents to recoup bad debt losses tied to rental fraud.
All parties involved in fraud reduction have a part to play. By understanding common fraud scenarios and the measures they can take to reduce fraud, property owners, managers and leasing teams can prevent significant financial losses. On the surface, these measures may seem repetitive or excessive, but they are essential and could save millions of dollars.
Common Fraud Scenarios
Many fraud actors get an early start by introducing falsification into the application process. The initial screening stage remains the highest point of vulnerability. Owners report seeing AI-generated paystubs, phony bank statements and fabricated forms of identification. With AI and other advances in technology, these can be produced with increasing realism and minimal technical skill, making it difficult for leasing teams to distinguish genuine documents from fake ones.
Subletting and identity-splitting schemes are also popular with defrauders. In these situations, applicants attempt to lease multiple units under different names to sublet them informally. The potential windfalls of such schemes make them appealing to bad actors. For example, in New York City, a man was accused of stealing a woman’s identity to rent a luxury apartment in the Murray Hill neighborhood of Manhattan, then subletting the unit and pocketing the rent. Prosecutors allege that he perpetrated rental scams in numerous Manhattan luxury buildings since 2021, defrauding landlords out of more than $800,000 in rent. In one instance, he even attempted to sell a subletter’s possessions and evaded arrest by jumping out of a fifth-floor window. This case, highlighted by Crain’s New York Business, underscores the sophistication and audacity of some fraud actors, and the significant financial losses that can result from unchecked subletting and identity theft.
Another common scenario is the misrepresentation of employment, income and residency history. NMHC surveys indicate that a large majority of owners and managers encounter application inaccuracies, further complicating the screening process.
With the availability of generative technology and online templates, the barrier to entry for document fraud continues to fall, and risk teams are now engaged in an arms race with fraudsters to develop tools and to detect increasingly sophisticated falsification methods.
A Multi-Layered Approach to Risk Mitigation
Awareness of common fraud scenarios is only the first step. Property owners and operators interviewed in NAA’s research point to a balanced strategy that integrates people, process and technology, including:
1. Document and Identity Verification
Using third-party verification platforms and digital forensics tools that analyze metadata or file integrity can be helpful. Property managers should cross-check applicant information provided against the information in trusted databases. Staff should also be trained to spot inconsistencies and cybersecurity risks.
2. Strengthened Screening and Due Diligence
There is still a place for traditional credit, background and employment verification, but it is best to supplement these with direct calls to employers and landlords, in-person interviews, and virtual identity checks. Property management teams that have centralized review processes could gain the upper hand by reducing on-site variability and its associated potential for error.
3. Policy and Process Controls
It is critical to ensure consistency of leasing policies and audit trails. Ideally, there should also be a separation of duties between leasing, screening and approval workflows to increase the likelihood of flagging inconsistencies. Finally, to underscore the importance of anti-fraud measures, consider assessing team performances by accuracy rather than the speed of approvals.
4. Fraud Detection Technologies
Advances in fraud-detection technologies are keeping pace with the evolution of fraud techniques. For example, detection tools like digital footprint analysis and AI-assisted fraud detection are now available. However, stakeholders cannot delegate everything to technology. There are still concerns about false positives and human judgment is still necessary. Further, regulatory compliance remains critical, and property managers must be able to demonstrate compliance with such requirements, including Fair Housing Act obligations. Fraud detection often benefits from escalation paths that provide additional scrutiny to questionable applications. Common-sense checks, cross-referencing applicant data and on-site awareness training can all help prevent fraud that automated systems miss.
5. Legal and Collections Strategies
It is easier to prevent fraud than to respond to it, but in cases where fraud still occurs, property staff should turn to legal counsel for advice. That advice may center on establishing structured payment plans or voluntary move-out agreements. Legal counsel can ensure that there is clear documentation to support court proceedings when necessary.
Building a Resilient Fraud-Prevention Framework
The most effective way to reduce fraud risk is a combined approach of human and digital fraud detection efforts and application of multiple prevention measures. For owners and risk leaders seeking to reduce exposure and enhance operational resilience, a holistic program typically includes: a formalized fraud-risk assessment incorporated into enterprise risk management; staff training on both fraud indicators and Fair Housing Act compliance; technology enablement from document verification to optional AI-assisted tools; clear policies and escalation protocols that are easy to understand and are communicated across all levels of the organization; and greater attention to legal preparedness and partnerships to manage delinquency efficiently.
The losses from unchecked fraud represent a mix of credit, operational, legal and reputational risks, all of which are increasingly cited in owner and operator surveys. Multifamily property managers, owners and investors who adopt a layered, risk-based approach anchored in governance and supported by people and technology will be best positioned to protect their assets and maintain operational stability. Stakeholder corporations can help by asking the organizations and real estate funds in which they invest to share their fraud prevention strategies and by making recommendations when risk mitigation is lacking. The ultimate goal is simple: to ensure that leases do not turn into losses.