Increasing Opportunities for Renters

In November 2021, we launched a credit-building initiative that has facilitated the reporting of on-time rent payments to the three major credit bureaus. This work has helped hundreds of thousands of renters build their credit file and has established credit scores for tens of thousands of renters who were previously credit invisible.
See our Credit Building webpage.

Financial capabilities education is an essential aspect of empowering individuals with the knowledge and skills needed to make informed financial decisions. With a strong understanding of personal finance, individuals can effectively manage their resources, plan for the future, and achieve financial goals.

Multifamily operators interested in providing access to financial capabilities building platforms should seek out those that are free to tenants and easily accessible. Excellent platforms are comprehensive, and include topics like budgeting, saving, investing, debt management, as well as understanding financial products and services. Freddie Mac Multifamily encourages multifamily housing providers to leverage our free financial capabilities building resource, Freddie Mac CreditSmart^®, for this purpose.

We have a full suite of CreditSmart Renter Resources that include interactive tools and self-guided lessons on a variety of topics like Understanding Your Income, Managing Debt, Renting a Home and so much more. It is available in multiple languages, including English, Spanish, Chinese, Vietnamese and Korean — and is available for free online. Check it out today.

Most lease agreements provide a grace period to renters during which the renter will not incur a penalty for a late rent payment. Our nationwide survey of tenant protections found that the majority of states require this flexibility, which is typically five days. This flexibility can often be offered at little cost to property owners, but it can be invaluable to renters who may be balancing biweekly pay dates against monthly rent obligations or even managing the practicalities of transferring funds.

Some properties may choose to provide rental pay date flexibility beyond a grace period, including by allowing renters to set a monthly pay date that works best for them, or by allowing renters to set alternative payment schedules that break up payments based on their pay cycles.

Beyond what property owners can do on their own, certain firms are now offering services that provide even greater flexibility to renters. For a fee, these services advance rental payments to landlords on behalf of renters, allowing renters to pay their rent on an agreed upon schedule.

Although these services can align the rent collections needs of landlords with the cash flow realities of renters, it is important to consider both the costs and benefits to renters. Multifamily owners interested in providing these services should pay close attention to the fee structures and ensure that renters are fully aware of these costs.

A rental security deposit is a set amount of money paid before taking occupancy of a rental property. The deposit is typically held by the property owner until a tenant moves out and any damages beyond normal wear and tear are deducted from the deposit before it is returned. These deposits, which are typically in addition to other fees due at move-in, including first-month’s rent, can be financially burdensome for some renters. Multifamily operators may also struggle with the management of security deposits, which can involve staffing commitment to manage appropriately.

Several firms now offer alternative security, which remove the need for large upfront payments while also providing landlords with a way to cover costs incurred due to damages. A few alternative security models include:

• Recoupment – The renter promises to pay the property for any damages, up to a pre-approved amount. If the renter fails to pay, the deposit company (the surety) pays the property instead; provider is authorized to bill the renter’s credit card up to a pre-agreed upon amount.
• Insurance – The renter purchases insurance, covering the property for renter-caused damages, up to a coverage limit.
• Installments – Renter pays reoccurring (e.g., monthly) installments instead of paying the entire security deposit upfront.
• Loans – Lender can front money for the property and renter pays the lender.

Although these services and practices can benefit both landlords and renters, it’s important to consider both the costs and benefits to renters. Multifamily operators interested in providing these services should pay close attention to the fee structures associated with any alternative security deposit services and ensure that renters are fully aware of these costs. In addition, operators should consider how a renters’ liability for damages is affected by an alternative security deposit. Renters who pay for what they believe is an alternative security deposit insurance may find they are still liable for any claims paid out to a property owner. Finally, landlords should be sure that tenants understand if and how these services affect their ability to be returned a security deposit at move-out.

The correlation between health and housing is crucial, as safe and stable living conditions directly impact overall quality of life for individuals and communities. In addition to providing safe and habitable housing, many multifamily property owners are actively integrating health and wellness programs and features into their properties to advance tenant opportunity and well-being.  

There are a variety of services and actions that property owners can leverage — often in partnership with local organizations — to support the health and well-being of tenants. Examples of services that have been successfully implemented include general health services such as on-site clinics and telehealth programs.

• General Health Services: In some cases, multifamily developments are purpose-built to include health care. In other cases, operators will partner with nonprofit organizations, like Rainbow Housing Assistance Corporation (Rainbow), that provide service-enriched housing programs for residents of rental housing communities, including health care resources. These resources focus on the community, promote the self-sufficiency of the residents, and are proved to increase the financial viability of multifamily assets.
• Telehealth: Many multifamily operators are working to provide telehealth resources to tenants who may lack ready access to medical services. For example, Freddie Mac’s 2021 Impact Sponsor of the year, Comunidad Partners, has partnered with Veritas Impact Partners, a nonprofit service provider for cost-burdened apartment residents to provide a virtual health care program for multifamily communities. This partnership resulted in a telehealth contract with a Fortune 500 health care provider, which allowed residents to access free telehealth services.
• Accommodations for those aging in place: With an aging population, it is increasingly common that residents will benefit from accommodations that will benefit their health and wellbeing. HUD has assembled a guide for “Helping Older Adults Age Safely in Place,” which includes a list of low-cost modifications multifamily owners can implement that can allow residents to maintain their ability to live independently.

Certification Programs:

Beyond health services, several organizations have worked to encourage good practices and set industry standards for housing that creates a healthy living environment:

• Enterprise Green Communities (EGC), includes “Healthy Living Environment” criteria that emphasize healthy conditions at the property.
• WELL Building Standard, includes 10 concepts and 108 features designed to foster real estate innovation in health and well-being.
• Fitwel offers a global building certification standard focused on optimizing occupant health and productivity.
• Multifamily Impact Council has created a framework that includes Health and Wellness criteria that emphasize building design and property management practices that protect and enhance the health of renters.

According to a Federal Deposit Insurance Corp. survey, an estimated 5.9 million U.S. households were “unbanked” in 2021, meaning that no one in the household had a checking or savings account at a bank or credit union. FDIC also found that 18.7 million households were underbanked, meaning households used financial products or services outside of the banking system, which often have transaction costs (i.e., check cashing, payday loans, pawn shops, etc.). Unbanked rates are higher among lower-income households, less-educated households, Black households, Hispanic households and working-age households with a disability. These populations are disproportionately renters.

Multifamily properties can help support the financial stability of renters and their ability to efficiently provide rental payments by supporting their efforts to locate banking resources:

• Connect Tenants to Traditional Financial Resources

Connect unbanked tenants with financial capability resources and institutions. This could include providing resources tenants can use to become more financially responsible or establish a relationship with a banking institution. 

• Allow Rent to be Paid at a Local Retailer

Some retailers will allow the tenant to pay their rent via cash. Money is transferred into the landlord's bank account, which makes the process much easier for the landlord. Tenants would also have the flexibility to pay whenever the retailer is open.  

• Leverage Funding Streams 

Local nonprofits may be able to accommodate financial support depending on local or state regulations or if a household lacks certain documentation, which creates obstacles to banking access.

• Partner with Firms that Offer Banking Innovations

Certain firms provide platforms to renters that both facilitate rental payments and provide innovative banking services. Properties interested in partnering with these firms should consider whether there are any costs to tenants, any fees associated with banking services, and other aspects of the banking services including rewards and savings rates.