How Artificial Intelligence is Revolutionizing Resident Screening
Artificial intelligence (AI) is one of those terms used so liberally that you’re never sure whether you’re being snowed by marketers. But in the context of RealPage’s new AI-based resident screening solution, the payoff is so obvious and easily documented that there’s no question it’s bringing about a revolution.
The ROI is proving to be absolutely remarkable: millions saved and billions added to asset values, based on an average of $31 in per-unit savings over the course of a year without negatively affecting occupancy or revenue.
All other screening solutions available for multifamily continue to rely on older methodologies for sizing up the likelihood of applicants paying their rent. They’re based on statistical and FICO scoring models, which are relatively imprecise in determining likelihood of rent payment. And the records are actually becoming thinner due to reduced credit card debt.
Knowing this, and under pressure to keep occupancy numbers up, leasing agents are turning more often to intuition and overrides, opening up properties to more risk and even Fair Housing or HUD violations. Without the most accurate screening, you’re always in danger of either turning away potentially good renters or moving in bad ones.
And what happens if there’s a downturn or spike in the market? The old scoring models simply can’t keep up with a rapidly changing rental environment where criteria need adjustment to reflect new local economic realities.
A second leap for resident screening
RealPage’s first major contribution to improving screening accuracy, one that still hasn’t been matched, was the addition of over 31 million records from actual rent payment histories to the mix of screening criteria. This was driven by the fact that the #1 indicator of whether someone will pay their rent is whether they’ve paid it in the past. Some people have a history of consistently paying rent even when falling behind on everything else. These are renters you don’t want to lose simply because they’ve been late payers on credit cards in the past or their income is modest. And only RealPage can pick them out of the applicant pool.
But the new AI technology represents an even greater leap in screening accuracy. It taps into both financial and rental history records as before. Yet now it applies machine learning and AI to these records, intelligently assessing financial records most closely correlated with rent payment. After all, what’s the use of records that only loosely reflect a person’s willingness to pay their rent? And with today’s thinner credit files, it’s critical to fully leverage data that are truly meaningful.
In fact, the new solution does not even consider rent-to-income as a factor due to its poor prediction of rent payment. It’s a metric that actually makes screening less accurate. Properties can still set income minimums, but no longer are their screening results polluted by a figure that is often faked, and a bad predictor even when accurate. This is the sort of improvement you would never adopt based on mere intuition, but that AI demonstrates clearly to be absolutely rational.
Unbiased insights for smart leasing decisions
With a new level of confidence in screening accuracy, leasing agents are less likely to invoke overrides and make other “intuitive” decisions that can lead to financial loss or Fair Housing violations.
One important thing the AI considers is the local applicant pool, because of course you won’t be applying the same standards in a market where an industry downturn has left renters hurting for cash as you do in, say, a market of affluent people with great credit. After all, you don’t want to ding occupancy. The whole point is to reduce financial loss without compromising occupancy or revenue. The new RealPage solution evaluates how risky an applicant is compared to the local applicant pool, along with other data (including property and market occupancy), to determine a risk profile and make a recommendation.
Because it’s nimble, the AI-based technology adjusts itself on a continual basis to keep up with fluctuations in local markets. And it’s continuously learning, so even though the technology is already delivering huge financial benefits, it will only get better and better over time.
The financial rewards of the new screening solution aren’t just pie in the sky; you can actually document them in analytical reports, aided by the Risk Advisory Services consultants who offer complimentary reporting and risk assessment.
RealPage Screening integrates with all major leasing software solutions, so even if your core software isn’t from RealPage you can still take advantage of this cutting-edge technology. With multifamily managers and owners rapidly adopting data analytics to judge performance, it’s a great way to prove you aren’t being left behind in the critical decisions that determine the quality of your resident base and their ability and willingness to pay their rent.