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Apr 30

Renters Continue to Face a Credit Crisis, as the Impact of Pandemic Rages On

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As lockdown lifts around the country, it looks like there is movement in the housing market, particularly for renters. However, the damage left by lockdown is going to take time to heal, particularly in the housing and rental market.

Across the United States, millions of renters are thousands of dollars behind in rent and utilities. According to the Washington Post, by the end of 2020, nearly 12 million people were behind on rent payments, for an average of $5,850 in past due rent payments.

Since the beginning of 2020, millions of Americans have lost their jobs, and approximately half of those who lost their jobs have struggled to find new ones. This has made the issue of paying rent on time an intimidating task for many households.

Even those who can keep up with rent may not be able to be as financially flexible as they were before the pandemic, and this can be an issue for those who want to build credit or maintain a good credit standing.

Normally, making payments on things like loans or credit cards can help boost a credit score. But because of more limited funds, millions of Americans are unable to make their usual payments for these bills. The federal CARES Act has ensured that some late payments will not lower credit scores, but building credit has become a challenge for many Americans nonetheless.

According to Consumer Reports, credit reporting inaccuracies have been piling up since the start of the pandemic, and have led to score hits for many consumers. Aside from the potential ramifications the pandemic has had on consumer’s credit scores, simply keeping up with rent has been a challenge for millions of people on it’s own.

Fortunately, one startup seeks to alleviate at least part of this disparity for renters.  Piñata is a new startup that seeks to revolutionize the relationship between landlords and tenants, while simultaneously helping renters boost their credit scores. The startup offers rewards for paying rent, which come through discounts on popular services like 1-800-Flowers or fitness classes with ClassPass. Through Piñata, monthly rental payments are also reported to credit agencies. This is a major innovation that benefits both renters and landlords alike. Renters using Piñata have the comfort of knowing that their rent payments are contributing to their whole financial picture. At the same time, landlords using the platform can help improve relations with their tenants, as they too, have been impacted by the pandemic’s housing and financial crisis. It’s a win-win for both parties.

“Switching to Pinata caused me to reevaluate my relationship with my tenants,” says Nathaniel Banks, a landlord with a series of properties in Manhattan. Prior to the pandemic, Banks had very few issues collecting on-time payments from renters. But that changed once the people started losing their livelihoods, and the ability to make on-time payments.

Banks explains, “I was skeptical at first, but incentivizing tenants to pay rent is a real game-changer. I have created a custom loyalty program to incentivize and reward loyal tenants, and I hope it will help differentiate my properties on the market.”

Credit scores have been hard to control since the start of the pandemic, and Americans are having a hard  time regaining their financial footing, even as life is starting to return to normal. Finding small ways to boost credit scores can have a long-lasting financial impact on millions of renters who are struggling.  It can also provide an incentive to make on-time rent payments.

Similarly,  property managers and landlords can improve their financial picture by incentivizing renters for on-time payments, and reducing late-payments. According to a story in RealtyTimes, taking a hospitality approach to tenant relations can improve acquisition rates, and lower tenant turnover. Approaching tenants with a touch of hospitality can also boost word-of-mouth referrals, and improve tenant satisfaction rates.

No one knows how long the financial effects of the pandemic will continue to linger, nor how long renters and property managers will continue to face a housing crisis. Fortunately, innovative solutions are emerging every day for bridging the gap between cash-strapped tenants, and the property managers who rely on timely rent payments to survive.

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