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 increases.
"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.
