Tough Rental Market Sees More Digital Payments, Cash Back, Discounts

A convergence of economic factors is creating the toughest market for renters — both residential and small business — in at least 20 years, and while there are no quick fixes to the shortage or prices, some payments tech firms are removing pain points and friction in rent payments.

In its State of the Nation’s Housing 2022 report, The Joint Center for Housing Studies of Harvard University (JHCS) said, “After a brief dip in 2020, rent growth in the professionally managed segment hit a record 11.6% at the end of 2021 and remained at that pace in the first quarter of 2022,” calling it the largest year-over-year increase in 20 years “and more than three times the 3.2% average annual rise in the five years preceding the pandemic.”

Unable to do anything about rental prices or availability, FinTechs and others are stepping in with digital payments tools to make modern renting seamless, even offering discounts.

Boston-based FinTech Rentdrop released its new mobile app for digital rent payments in June, offering tenants and landlords choice in how rents are paid and received.

Rentdrop Co-founder and CEO Remen Okoruwa told Biz Journals: “When we see that cash and checks have remained so durable, and the fact that how one side wants to collect and one side wants to receive creates friction, the opportunity we saw was, why don’t we build a rent payment solution that actually breaks those two problems apart?”

Growing out of the increasingly common arrangement of roommates splitting rents and the collection and payment issues that ensue, the app is designed to make it easier for both tenants and landlords to take payments digital and simplify an often-messy process.

“Renters with landlords who want digital payments can use Rentdrop to pay with a card or with an electronic fund transfer (ACH),” per the report. “For landlords who want checks, renters can link their bank account with Rentdrop to make digital payments.” Once Rentdrop detects that the full amount has been submitted, Okoruwa said, they will mail a check to the landlord on the renter’s behalf.

Rent Discounts, Cash Back On the Rise

See also: Faced With Soaring Costs, Tight Supply, Renters Tap Crowdsourcing, Government Aid

In early July, Houston-based Venterra Realty, which owns and manages 70 communities and over 20,000 apartment units in 16 U.S. cities, announced its new Autopay Discount program, offering renters who enroll a $20 monthly credit for automatic electronic rental payments.

“Venterra’s AutoPay system streamlines the payment process and offers residents flexibility and options for various forms of payment within the program. The goal of this program is to reward renters for opting into Venterra’s AutoPay, which was designed to purposefully simplify and improve the payment process by eliminating the hassle of logging into a pay portal or visiting the office to pay rent monthly,” per the announcement.

“By enrolling in AutoPay, Venterra’s more than 38,000 residents will be rewarded and will obtain a $20 monthly credit, allowing for a $240 annual savings,” the company wrote. “During a time when inflation is estimated to be at a 40-year high, this is a significant relief.”

In June, rental FinTech startup Stake completed its $12 million series A, noting in a press release that rents increased 150% between 1985 and 2020. “Using Stake, property managers receive a 130% return on every dollar spent. Renters earn an average of 4% Cash Back on their rent each month,” the company noted.

Stake said $385 million in annual leases are now connected to its platform, and that “65% of renters have more money in their Stake account than any other banking account. In the past year, the number of residences that offer Cash Back with Stake has grown by 10x.”

See also: Stake Raises $12M to Offer Renters Cash Back and No-Fee Bank Service

SMBs Feel Rent Squeeze

In its Q2 Rent Report, small business referral network Alignable found that “33% of U.S.-based SMBs could not pay May rent in full and on time, up 5% from April.”

Alignable added that “more than four out of ten restaurants (41%) couldn’t cover May rent, up 8% from April, and 13% from February.”

In a July blog post, small business lending platform Nav said “one-third of small businesses couldn’t afford to pay their rent in the last six months,” noting that some SMBs are using term loans to “cover immediate business expenses and are usually flexible enough to be used for rent. These may offer lower interest rates than other options but can be more difficult to qualify for than other options, depending on the lender.”

PYMNTS research found that over the course of the pandemic, many SMBs have had to decide between rent payments and vendor payments. We reported that a combined 49.7% said that “when cash got tight, they had to not pay suppliers or monthly bills. Among the respondents, 20% said they only did this last year, while 30% either continued or started the drastic step in 2021.”

See also: Half Of SMBs Manage Cash Flow Crunch By Not Paying Rent Or Vendors