Here's how property managers can adapt.
June 29, 2023 |
Updated July 12, 2023
After a global pandemic, the rise of remote work, ballooning home prices and a cost-of-living crisis, many people can no longer afford to buy a home. Others have come to value the flexibility that comes with not being tied to one place long term.
The fact is that renters have fundamentally changed – and they now comprise more than one-third of the U.S. population.
And yet, some would argue that rental housing industry operations haven’t changed very much. Though technology has advanced exponentially in the past few decades, property managers and residents are experiencing the same pain points they always have.
Compounding this problem is a reduced workforce at leasing offices. Much like hospitality teams recovering from the pandemic, onsite teams are still thin, making it even harder to operate and more important to streamline processes.
Proptech companies have been thinking about this problem, believing that by exploring untapped opportunities in technology and commissioning research into the psychology of renters, the property management industry can evolve in several important ways.
That would be a game changer for renters, yes, but it would also transform the experience of housing providers and property managers. Happier, more comfortable residents mean more on-time payments, fewer damages and repairs, reduced turnover, lower workforce costs and more positive word-of-mouth referrals.
Think Beyond Amenities
Attracting and retaining residents now goes beyond what the physical building offers. For some, a beautiful pool, common area and abundance of elevators and parking spots are no longer considered luxuries – they’re industry standard. And those amenities, while important, fail to help renters where it makes the biggest impact: Their pockets.
Property managers are now in the position to offer additional amenities in the form of tech solutions that consider their residents’ budgets and lifestyle preferences. In the coming years, this could be what will keep occupancy rates high and make it easier for property managers to manage and run their businesses.
Pay-Later Plans Are Taking Off
The public perception of pay-later plans has evolved. Previously, most consumers using these programs did so because they couldn’t afford to cover a lump sum and needed a financial lifeline. Now, however, consumers of all kinds are choosing pay-later programs for flexibility.
It’s a trend that accelerated during the pandemic, which changed consumer priorities and adjusted the way many people get paid as they increasingly took on consulting, part-time jobs and gig work. No longer bound to rigid monthly or biweekly pay periods, these consumer preferences clash with the traditional schedule of rent being due on the first of the month.
During times of economic uncertainty, consumers facing a $3,000 bill would rather pay a small fee for the convenience and peace of mind of dividing the lump sum, even when they have enough money in their account to cover the whole bill.
Consumers are becoming increasingly accustomed to having pay-later options. Almost every e-commerce platform is including a payment installment option to help customers and attract more consumers. Property managers could adapt by offering renters the option to pay rent in smaller installments, while third-party proptech companies serve as an intermediary in the process, handling the initial upfront payment, shouldering the risk and charging the resident a small fee.
Revamping the Security Deposit
Security deposits give property managers a critical layer of protection against unpaid rent or utilities and damage that goes beyond normal wear and tear. But the large lump sums that are typically required to sign a lease (often one or two months of rent along with the rest of the move-in costs) are becoming unattainable for some renters as they navigate today’s affordability crisis.
Property managers can adapt by offering security deposit alternative programs, in which proptech companies assume the financial risk by managing deposits while residents pay a low monthly fee. The alternative solutions can help properties get coverage for a higher amount than the security deposit, which can help reduce the overall bad debt of the portfolio. Another benefit is that any disputes that arise over property damage can remain between the proptech company and the resident.
This can also reduce the workload for property management companies and free up staff to focus on specialized tasks. Managing security deposit funds is time-consuming, and every state has its own guidance on how to manage them. Some require deposits to be held in escrow, some require a letter about the deposit to be sent to residents within a certain number of days. That means researching a renter’s new address and sometimes even chasing money that’s owed. Multiply that by a community of 300 people with 50 move-outs, and that equals a lot of work.
Property managers can adapt with tech solutions that allow onsite teams to spend their energy on other tasks while security deposit management runs in the background.
Proptech solutions can empower renters and streamline the property management process because offering renters a way to reclaim control of their finances shouldn’t have to come at the expense of their relationship with the property owner, nor the owner or management’s interests.
Brian Ball and Revital Gadish are Co-CEOs at Qira.