PROPERTY MANAGEMENT position gives us the flexibility to continue putting capital to work on planned CapEx and marketing events while other property own -ers may have to delay projects as their inter -est payments rise,” Dunton remarks. “The capital markets have had limited impact on property-level needs for us.” pay rent. The good news is that those eviction moratoriums have all but ended. In some cases, as Equity Residential highlighted in its first-quarter earnings release, delinquent tenants are beginning to pay rent or move out quicker than initially expected. That’s true even in California, where some jurisdictions had extended eviction bans into the summer. It can still take several months to evict ten -ants, however. Not only does a backlog of cases plague courts — a trend generally most pro -nounced in tenant-friendly jurisdictions like Atlanta and Chicago — but the 30-day eviction notice that Congress established in the $2.2 tril -lion Coronavirus Aid, Relief and Economic Se -curity (CARES) Act during the pandemic also remains in place for properties backed by feder -al housing programs, including Fannie Mae and Freddie Mac mortgages. DWIGHT DUNTON Bonaventure Regulatory Creep Arguably the biggest challenge that the multifamily sector faced during the pandemic was the inability to evict tenants who did not Draper and Kramer developed Wrigleyville Lofts, a 120-unit transit-oriented development located in the Wrigleyville neighborhood of Chicago. The project was completed in 2021. The Chicago-based owner/operator says property managers today are closely watching every line item to identify operating-budget savings. By comparison, the state of Illinois required a five-day eviction notice for non-payment of rent prior to the pandemic, shares John Kennedy, executive vice president of operations with Evergreen Real Estate Group, a Chicago-based owner and operator of 11,000 primarily affordable housing units in the Midwest and Southeast. Evergreen also is expanding in the Northeast and West. “Thirty days is a long time, especially if you have a number of residents who are taking ad -vantage of the rule,” he asserts. “Our staff works very hard with residents to find an alternative solution because it’s our preference not to evict people. But it has been much more difficult to collect rent.” Plus, Kennedy continues, the end of pandemic-related rental assistance will likely drive rent deliquencies higher. The National Apartment Association (NAA) notes that a CARES Act drafting error allowed the 30-day notice rule to remain in place for too long. Legislation introduced in Congress ear -lier this year and supported by the association would vacate the requirement, according to an NAA spokesperson. The eviction delay places more pressure on affordable housing property managers. In ad -dition to their daily duties of maximizing oc -cupancy, collecting rent and performing main -tenance, for example, they are tasked with tracking and enforcing income restrictions in projects financed with low-income housing tax credits or public aid. “I’ve been doing this for about 30 years, and the industry has become much more complex,” emphasizes Kennedy. “You’ve got different agen -cies looking at your paperwork and conducting audits, so it’s an ongoing challenge to maintain high standards and meet expectations.” Managers of market-rate properties may also eventually encounter more federal and state government encroachment into their day-to-day operations. The Biden administration has introduced a “Blueprint for a Renters Bill of Rights” to advocate for rental affordability and strengthen renter protection. www.MultifamilyAffordableHousing.com FAKE APPLICATION SCAM IS ACCELERATING T he coronavirus lockdowns subjected multifamily property managers to radical operational changes that have had a lasting effect. Some changes, like incorporating virtual or self-guid -ed tours into the marketing process, have overall been positive. Others, such as the ongoing 30-day eviction notice requirement for properties with federally insured mortgages, including Fannie Mae and Freddie Mac, have not. Prior to the pandemic, notification periods varied by states, ranging from as few as three days to 45 days, and often hinged on the violation, such as nonpayment of rent or illegal activity. City ordinances can come into play, too. But the switch to a virtual application process as well as the eviction restrictions also served as catalysts for renter fraud, a problem that continues to grow today. Identity theft in general cost U.S. victims $43 billion in 2022, a decline of 17 percent from 2021, a year in which ID fraud spiked, according to Javelin Strategy & Research, a consultant for financial institutions. Typically, fraudsters present bogus or stolen identities and documentation when applying for a unit, and when they gain access, they often do not pay rent. Several screening companies have begun tackling the problem. On average, an eviction costs apartment owners $7,685, according to a 2022 report by Snappt, a tenant fraud and bad debt screening firm based in Los Angeles. Snappt also found that one out of every eight multifamily applications is fraudulent. In some markets, that number is four in 10. The rise in fraud has been pronounced over the past three years, the report noted, and paralleled the rise of a cottage industry dedicated to fleecing pan -demic programs by producing fake paycheck stubs, bank statements and other documents, or stealing real ones. Some markets like Houston and Atlanta have been impacted more than others, but apart -ment managers are also beginning to see the problem crop up in South Florida. At one time, the perpetrators of fraud targeted lower-end apartment communities, says Chris Finlay, CEO of Middleburg Communities, a Dallas-based developer that owns and operates 5,000 units in the Southeast and mid-Atlantic United States. That’s not the case anymore. “It has become much more widespread, even in Class A apartments,” he adds. “It has been one of those things where you don’t know how bad it is until you employ tools that can identify fraudulent applications.” The reasons for people committing fraud vary. A report in The New York Times detailed the ar -rest of a fraudulent applicant who re-leased luxury units to gang members who likely couldn’t pass a background check. But it could be that people simply blew up their credit rating during the health crisis or are using the units as short-term rental investments, property managers say. Fraud has become a major point of emphasis at Draper and Kramer, an owner and operator of some 6,000 Class A and luxury units in Chicago, Dallas, Phoenix and St. Louis. Property manag -ers have seen an uptick in “vague” applications, says Bill Van Senus III, assistant vice president and regional property manager for the company. Letting one slip by can potentially turn into a big hassle in Chicago because once residents sign a contract, they can live in the unit for 10 months before being evicted, he points out. “Short of the FBI taking someone to jail for doing this on a massive scale, you have to prove fraud, and it’s a very long process,” he explains. “There’s just no way of getting around it — Chicago is a little more tenant-friendly when it comes to some of these rules.” — Joe Gose 20 | Southeast Multifamily & Affordable Housing Business | July/August 2023
Southeast Multifamily & Affordable Housing Business July/August 2023: Page 20
