FinTechs, Issuers Rally to Ease Rental Housing Crunch

house with for rent sign

A perfect storm of factors finds more U.S. consumers facing soaring rental prices on fewer homes in 2022, bringing more FinTechs and big names in finance to confront the crisis for renters with new housing search capabilities, innovative payment solutions and more.

Giving context to the trend, in its Quarterly Residential Vacancies And Homeownership, Fourth Quarter 2021, the Census Bureau found the rental vacancy rate at 5.6% in Q4 2021.

In a February blog post, the National Association of Realtors called that it the lowest supply in nearly 40 years, adding, “With a low vacancy rate, asking rents have increased at an average of 11.2% year-over-year over the past 12 months.”

Tracking the rental market since 2019, real estate brokerage Redfin said in March that rents skyrocketed between 2020 and 2021, finding that “The average monthly asking rent in the U.S. increased 15% year over year to a record high of $1,901 in February.”

“When the cost of homeownership increases, many potential homebuyers opt to rent instead, which drives up rental prices,” Redfin Chief Economist Daryl Fairweather said in a press release, noting that mortgage rates are increasing faster than rents. “Americans should brace themselves for continued inflation across the board and try to find ways to cut costs.”

Among major metros now seeing the highest year-over-year rent increases, according to RedFin, are Austin, Texas (40%); Portland, Oregon (39%); and New York City (36%).

In a March interview with CBS’s “60 Minutes,” Fairweather said government estimates on rental units are that “we are short about 4 million homes in this country, and that number is likely growing, especially since the pandemic.”

With PYMNTS research finding that 50% of consumers earning more than $100,000 per year reported living paycheck to paycheck in February — up from 48% in January — and urban areas getting even pricier, consumers are looking to financial services for rental payment innovation.

Get the study: New Reality Check: The Paycheck-To-Paycheck Report, Regional Divide Edition

The Rewards of Renting

A FinTech purpose-built for the pandemic era rental trend is Bilt Rewards, launched in mid-2021 as an alliance of rental properties allowing rental payments to accrue loyalty points redeemable with various partners for travel, dining and other items and experiences paid with points.

In the card space, Wells Fargo partnered with Bilt Rewards in late March to be the official issuer of the Bilt Mastercard first introduced last year.

“The public launch of the Bilt Mastercard marks the first time that renters can earn rewards on the collective $500 billion spent nationwide in the U.S. each year on rent, without the transaction fees historically charged by properties,” according to a press release.

See also: Wells Fargo’s ‘Rewards for Rent’ Card Taps Points as Currency Incentive

Solutions Focus on Landlord-Tenant Trust

Elsewhere, FinTech Obligo announced a Series B funding round in November, raising $35 million to continue building its solution to ending steep upfront cash and check security deposits via a payment preauthorization agreement between landlord and tenant.

The platform uses artificial intelligence (AI) technology to review Open Banking data to determine whether renters are eligible to rent a property without putting down a deposit and lets them make all their move-in payments (including the deposit if necessary) through a single portal. At move-out, the platform handles end-of-lease deductions, refunds and billing for open charges.

Platform Till entered the fray in 2020 with its flexible rental concept, enabling renters to set a staggered schedule for rent payments to ensure full rent is paid on time each month. The platform has budget and save features, and a credit-building capability as well.

“With Rent Protection, Till covers rent when enrolled residents are short,” Till said in a press release. “Till then enables the renter to successfully repay Till while budgeting and saving in advance of the next month’s rent.”

Also launching in 2021, Jetty Rent is billed as “rent now, pay later” by the company.

Jetty CEO and Co-founder Mike Rudoy noted in a press release that the option gives property managers the predictable cash flow they need while freeing renters from the rigid payment dates “that don’t reflect the financial realities of today’s renter population.”

See also: Till Unveils Flexible Rent Features

Redfin is in the mix too, having debuted rental property search on its website in March. Redfin acquired rental industry platform RentPath in 2021 and this is first use of that technology.

“With about one in five visitors interested in rentals, we have an opportunity to generate as many rental inquiries from as from all other RentPath sites,” CEO Glenn Kelman said in a statement.

Read also: Redfin Completes RentPath Purchase