Landlords will be happy with a
report published by TransUnion, the credit reporting company. It says that, not only have rents risen in
each of four classifications of rental properties it analyzed, but so has the
risk profile of applicants to rent those properties. The latest TransUnion Rental Screening Solutions industry report found that
average rental prices have increased nearly 4% nationwide and the credit risk
of applicants for those properties as measured by TransUnion's Resident Scoring Model has steadily improved, with an
average improvement of 1% in the last year.
In conducting the study TransUnion
collected data from property managers for the same properties in September 2012
and September 2013. The company divided
rental properties into four levels; Level A (newer, institutional properties),
Level B (older, institutional), Level C (older, less desirable area) and Level
D (older, less desirable area, renovations/updating needed). In 1912 the respective rents ranged from $665
for Level D to $1,198 for Level A with the average across property types at $1,034.
By 2013 all four levels experienced rental
increases with the average rising to $1,072.
The largest percentage increase was for Level D at 4.2 percent (to $693)
and the smallest, at 2.1 percent was Level C, from $843 to $860. Levels A and B each saw increases of 3.8
percent with the 2013 price for Level A averaging $1,244 and Level B rising
from $1,008 to $1,047.
TransUnion found that the credit
risk of residents also improved across the board with average increases in
credit worthiness at Levels C and D up to double the improvements noted for the
most expensive properties. Level A was
up 0.9%; Level B, 0.3%; Level C -- up 1.3% and Level D -- up 1.7%. The company offered no explanation for the
"The rental market continues to
be strong as demand for rental units remains high while consumer credit risk
slowly improves," said Michael Doherty, senior vice president of TransUnion's
rental screening solutions group. "The combination of improving rental
risk scores and continued demand for rental properties is particularly good
news for property managers."
"As property managers determine
the criteria for what types of residents they want for their properties, it is
valuable to have a basic understanding about the risk level of the rental
population," he continued. "When
the credit risk of the population improves, property managers may be more
inclined to tighten their criteria to ensure they are getting the best possible
resident. This is integral because a resident who 'skips' out on a lease can
cost a property manager thousands of dollars in lost revenues."
TransUnion noted that the rent
increases and the improvements in credit risk was not a regional phenomenon; it
was apparent in most markets. For
example in Los Angeles average rental costs rose 3.2% from $1,565 to
$1,615 while credit risk improved 1.1%.
In New York rents were up an average of 5.5 percent and credit risk by
0.4 percent, and in Chicago average rental costs increased nearly 5% from
$1,345 to $1,411 while credit risk remained the same.