Recently, the Wall Street Journal reported that Freddie Mac, the largest backer of apartment loans in the US, had announced a program to give loans to property managers in exchange for an agreement to cap rent increases for the life of the loan.
The goal is to keep rent manageable for lower and middle income tenants who might otherwise face difficulties with annual rent increases, and have to move.
While the program has clear advantages, one potential consequence is added pressure on landlords to keep occupancy rates up. In many cases, this task will be made more difficult by the lack of time or resources to examine the credit quality of any given tenant. This lack of resources leads to a fairly cookie cutter approach that can exclude many viable renters. For example, in New York, many applicants who meet the standard income requirement of 40x the monthly rent are turned away from apartments due to either poor credit or a lack of credit history.
We founded TheGuarantors with exactly this issue in mind. Through our lease guarantee product, we serve as a trusted intermediary between landlords and tenants — opening up the range of renters available for a given unit while building confidence on both sides of the rental process.
The goal is to help landlords and tenants find each other faster, more easily, and with less risk. In cases like Freddie Mac’s program, where landlords charge lower rent and may feel more pressure to keep apartments occupied, a broader pool of potential tenants can be a significant advantage.
And the benefits to tenants are tangible. At the beginning of this year, the New York Post ran a story about Christopher Russo, a New York firefighter. Russo and his wife were initially denied an apartment rental on the Upper East Side due to their credit history. This led their management company to recommend them to TheGuarantors.
For a small fee, we guaranteed their lease. Russo described the process as pleasant from start to finish — and the couple got the apartment.
To date, we’ve guaranteed more than $100 million in rent for people in similar circumstances. It looks like Freddie Mac’s new program will make things easier for a similar group of renters and their landlords. That’s a goal we can support.