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<\/p>\nSome Houston apartment owners and operators say they are facing repeated blows as tenants defraud them, systems fail to protect them, and lenders turn a blind eye.\u00a0<\/p>\n
<\/p>\n
\n Bisnow\/Maddy McCarty\n <\/p>\n
\n RPM Living\u2019s Christopher Cunningham, Lincoln Property Co.\u2019s Aura Malpica, Partners Real Estate\u2019s Scott Lunine, Better World Properties\u2019 Terri Clifton and Blue Stream Fiber\u2019s Kate Grutzmacher.\n <\/p>\n
As elevated interest and flat rental\u00a0growth make it hard for owners of older workforce housing<\/a> properties to pay their mortgages, they are also seeing prevalent rental fraud<\/a>\u00a0that drives up\u00a0bad debt, panelists said at the Houston Bisnow Multifamily Annual Conference on Tuesday.<\/p>\n More than 70% of multifamily landlords reported an increase in fraudulent rental applications<\/a> at the end of 2023, and the Texas Real Estate Commission warned of a massive leasing fraud scheme<\/a> last year. The issue\u00a0is a lingering impact of pandemic-era eviction moratoriums, said Christopher Cunningham, senior vice president of operations for property management company RPM Living.\u00a0<\/p>\n \u201cThe vast majority of them have evictions<\/a> on their records,\u201d Cunningham said onstage at the Hyatt Regency Houston West. \u201cThey have bad debt. They have cyclical, low credit. So unfortunately, they’ve now turned to crime syndicates.\u201d\u00a0<\/p>\n These enterprises\u00a0create sham credit histories, Social Security numbers and other information to help applicants get approved for an apartment, he said.\u00a0<\/p>\n Some of these documents meet Tier 5 qualifications, meaning they include embedded chip technology<\/a> and are nearly impossible to distinguish from authentic documents. Artificial intelligence<\/a> is making it easier to create high-quality forgeries<\/a>.<\/p>\n \u201cI have to spend more money on technology fighting those to keep them out,\u201d Cunningham said.<\/p>\n \n Bisnow\/Maddy McCarty\n <\/p>\n \n The Morgan Group\u2019s Philip Morgan, Buckhead Investment Partners\u2019 Kevin Kirton, Hines\u2019 Ashley Prasse-Freeman, Greystar\u2019s Ryan Terrell, Rockefeller Group\u2019s Philip Croker and Legal 1031 Exchange Services\u2019 Cindy Pham.\n <\/p>\n Sometimes fraud isn\u2019t discovered until a resident fails to pay rent. Management then has to start the eviction process, and the federal CARES Act, passed in 2020,\u00a0requires an extra 30-day notice<\/a>\u00a0before an eviction can be carried out.\u00a0<\/p>\n \u201cSo now they’re collecting even higher debts against us, which then inverts my NOI,\u201d Cunningham\u00a0said. \u201cWhich makes my owners, who are already struggling with debt service and interest rates<\/a>, to then take in less cash, which then puts us in a negative position.\u201d\u00a0<\/p>\n Most tenant protections available during the pandemic have expired, but judges continue to grant residents more time before finalizing evictions, Better World Properties<\/a> Managing Partner Terri Clifton<\/a> said. The property management company is working to educate lenders about the problem.\u00a0<\/p>\n \u201cBad debt is growing, just based on our court systems,\u201d Clifton said. \u201cWhen we’re getting [underwritten] by the lender, it wouldn’t be as bad if we could educate them.\u201d\u00a0<\/p>\n The state of bad debt and residents\u2019 financials is worse in Houston than in other markets RPM Living is present in, Cunningham said. Houston also has a high proportion of older workforce housing<\/a>, the kind that is heavily distressed.\u00a0<\/p>\n Greystar<\/a> has tracked almost $500M worth of real estate that was foreclosed on in recent months, most of which were Class-B and C multifamily properties, Managing Director Ryan Terrell said.\u00a0<\/p>\n \n Bisnow\/Maddy McCarty\n <\/p>\n \n Wilson Cribbs & Goren\u2019s Travis Huehlefeld, Z & Co.\u2019s Ziad Kaakouch, JPI\u2019s Miller Sylvan, Sudhoff\u2019s Jacob Sudhoff and Disrupt Equity\u2019s Ben Suttles.\n <\/p>\n Across multiple asset classes, the properties experiencing financial trouble were largely built prior to 1990, said Scott Lunine, a partner specializing in investment sales at Partners Real Estate<\/a>.\u00a0<\/p>\n Distress takes away from value-add and capital expenditures budgets,\u00a0leaving properties in a state of disrepair<\/a>. Houston officials say they\u2019re working on addressing<\/a> abandoned and neglected apartment complexes by holding owners accountable.\u00a0<\/p>\n \u201cThat’s the biggest thing that we have to figure out in this city, is what we’re going to do with older product,\u201d Lunine said.\u00a0<\/p>\n","protected":false},"excerpt":{"rendered":"Some Houston apartment owners and operators say they are facing repeated blows as tenants defraud them, systems fail…\n","protected":false},"author":3,"featured_media":291006,"comment_status":"","ping_status":"","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[5130],"tags":[149236,149241,69354,39815,820,149235,4345,139592,149239,70714,149240,149237,149238,358,3187,138438],"class_list":{"0":"post-291005","1":"post","2":"type-post","3":"status-publish","4":"format-standard","5":"has-post-thumbnail","7":"category-houston","8":"tag-better-world-properties","9":"tag-christopher-cunningham","10":"tag-distress","11":"tag-evictions","12":"tag-fraud","13":"tag-greystar","14":"tag-houston","15":"tag-partners-real-estate","16":"tag-rental-fraud","17":"tag-rpm-living","18":"tag-ryan-terrell","19":"tag-scott-lunine","20":"tag-terri-clifton","21":"tag-texas","22":"tag-tx","23":"tag-workforce-housing"},"share_on_mastodon":{"url":"https:\/\/pubeurope.com\/@us\/115347916568212409","error":""},"_links":{"self":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/291005","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/users\/3"}],"replies":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/comments?post=291005"}],"version-history":[{"count":0,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/posts\/291005\/revisions"}],"wp:featuredmedia":[{"embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media\/291006"}],"wp:attachment":[{"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/media?parent=291005"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/categories?post=291005"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.europesays.com\/us\/wp-json\/wp\/v2\/tags?post=291005"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}<\/p>\n<\/p>\n