At Issue MD - The Effect of Synthetic Fraud on Rental Housing
Fraud is a growing problem facing rental housing providers. The digital age has brought about new tools available to those who might take advantage to the detriment of other community members.
For years, the industry has been dealing with online businesses offering fraudulent documentation of companion animals as service animals or emotional support animals to get around no-pet policies, breed restrictions and required pet fees/deposits. In exchange for a small fee, internet-based services such as the Dogtor.com, CertaPet, and SupportPets.com will provide a “doctor’s note” verifying a renter’s “disability” without ever even interacting with the individual. These documentation mills have become so prolific that advertisements such as the one linked below are commonplace across social media.
Media outlets have spotlighted this trend along with some of the more unusual tenant requests to share their apartment units with emotional support alligators, ostriches and other atypically-domesticated pets. But an even more nefarious trend is taking hold, causing significant challenges and concerns for apartment communities.
A new cottage industry has arisen, providing fake identities and financial documents for individuals seeking to secure a lease and evade rent payments. This “synthetic fraud” was highlighted in a recent Bisnow article, “TikTok is Helping to Fuel a Wave of Renter Fraud at Luxury Apartments.” It works something like this:
While the tactics vary, the results are almost always the same: Tenants get approved for luxury units, move in and never pay rent. Landlords start a lengthy eviction process, and with courts still bogged down from the pandemic-induced eviction moratoriums, cases can drag on for months. Before they can be resolved, the renters pack up and move out in the middle of the night.
This type of fraud is growing rampant, and it’s happening right here in our backyard. One AOBA member reports a recent experience wherein they learned of synthetic fraud being committed at their property upon being contacted by the true owner of the name and social security number that had been used to lease an apartment. The tenant had used an online service to purchase the stolen identity as well as forged financial documents. The operation was so sophisticated that when the property management called the prospective tenant’s employer to verify their employment, the inquiry was routed to a call center where a live operator provided the required confirmation.
Another member company purchased a multifamily property in January, inheriting a fraudulent tenant. Upon taking over the community, the new management group discovered that the individual had leased five different apartment units in the building for the purposes of conducting his criminal enterprise, all under separate false identities. The housing provider only learned the tenant’s true identity after police responded to a shootout in one of the units, resulting in four fatalities and multiple injuries. Police found four semi-automatic weapons, suitcases full of illegal drugs, and piles of cash in the unit in which he resided. Despite all of this, he has been released and is free to return to the unit. Police are unable to bar him from the property until the court has ordered an eviction and residents and property staff are terrified that he will return, and additional violence will follow.
Ultimately, the impact of this type of criminal activity is felt by the entire community, not just the housing provider. Beyond the obvious public safety issues inherent in a housing provider not knowing who is coming and going from their property, synthetic fraud carries a significant cost that results in upward pressure on rents for all of the other residents of a community who choose to play by the rules. The individuals who perpetrate these crimes use false identities, making it nearly impossible to ever recoup their delinquent debts.
Housing providers rely on rent as a sole revenue source. Significant losses can only be balanced through a reduction in services, deferral of community upgrades and capital investments, or rent increases. Ultimately, it is the other residents of the community that suffer.
As technology evolves, new tools are needed to combat this type of criminal enterprise, including expedited eviction for tenants who obtain possession of an apartment unit through fraudulent means as well as prosecution of those who commit synthetic fraud and those who facilitate these crimes through the production and provision of false or stolen identities and financial records.
At Issue is compiled by the Apartment and Office Building Association (AOBA) of Metropolitan Washington, and is intended to help inform our elected decisionmakers regarding the issues and policies impacting the commercial and multifamily real estate industry.
AOBA is a non-profit trade organization representing the owners and managers of approximately 185 million square feet of office space and over 400,000 apartment units in the Washington metropolitan area. Of that portfolio, approximately 80 million square feet of commercial office space and 94,000 multifamily residential units are located in the District. Also represented by AOBA are over 200 companies who provide products and services to the real estate industry. AOBA is the local federated chapter of the Building Owners and Managers Association (BOMA) International and the National Apartment Association.
Along with input provided by AOBA member companies, the following data sources and references were used in compiling the attached report:
- Jarred Schenke. “TikTok is Helping to Fuel a Wave of Renter Fraud at Luxury Apartments.” Bisnow. December 4, 2023.
AOBA strives to be an informational resource to our public sector partners. We welcome your inquiries and feedback. For more information, please contact our Senior Vice President of Government Affairs Brian Gordon at email@example.com.