The Growing Need for Affordable Housing
From rural towns to major metropolitan areas, a severe affordable housing deficit has affected communities across the United States for decades. Exacerbated by macroeconomic headwinds like record-high inflation and rising rents, the gap in affordable, available homes for renters has significantly worsened in recent years — currently standing at a shortage of 7.3 million units.
As the commercial real estate industry grapples with this growing issue, the affordable and workforce housing spaces have seen an influx of institutional capital in recent years propelled by increased demand for environmentally and socially conscious investment practices. However, this asset class often presents owners with its own unique set of challenges. Unlike luxury multifamily housing where most applicants have high credit scores and can easily get approved, this is not the case with many affordable housing rental applicants. Lower credit scores make it harder for applicants to get approved and more difficult for owners to know which residents to accept. As more institutional players enter the affordable housing sector, there is a growing need for solutions that help owners better manage the risks associated with the space while making it easier for renters in need to secure housing.
Modernizing the Tenant Screening Process
Market dynamics persist, and there is a greater emphasis on identifying solutions that help create a more equitable renting environment for owners and residents, leading RET to our most recent investment in Rent Butter.
Built to help owners and operators of workforce and affordable housing communities better assess risk when screening potential residents, multifamily, single-family rentals, and manufactured housing benefit from Rent Butter’s tenant screening process. Traditionally, owners of these types of properties have relied primarily on static data like credit scores and background checks when vetting potential applicants, which provides only a partial picture of renters’ financial footing.
Rent Butter’s digital application allows owners and applicants to transcend static credit checks in favor of sharing alternative data like banking, spending behavior, and other unique metrics. The platform then provides property owners with in-depth financial and credit reports in a matter of seconds. By reviewing the entire financial history of a prospective resident and using predictive analytics, Rent Butter highlights key trends — such as whether a credit score trajectory is on the rise or getting worse — helping property owners avoid threats like rent defaults and consistent turnover and providing them with more accurate, holistic and equitable assessments of an individual’s ability to pay rent.
The platform is also working to create a better leasing experience by fitting seamlessly within property managers’ existing workflows and has the ability to validate important documents like applicant I.D.s, employment records, and income statements in real-time – protecting property owners from fraud.
Founded Through Experience
Rent Butter was founded in 2021 by Tom Raliegh and Chris Rankin after the pair worked together at a large institutional REIT in Chicago. As an eviction attorney, Tom was often involved in dealings with residents who were in arrears on rent; in these cases, working closely alongside residents on court-ordered payment plans.
Witnessing first-hand how a dearth in affordable housing options set these individuals on path to face an uphill battle for years, Tom and Chris decided to create another way for residents to communicate their strength as tenants. Using Rent Butter, these individuals are given a chance to convey to landlords that (despite a bad credit score damaged during a rough patch in their history) they are good, reliable renters. By incorporating banking information and other unique, subprime data — including, in certain instances, rent payment history — Rent Butter helps renters build a robust financial resume. Ultimately, this resume provides information that can demonstrate prospective renters’ financial stability and positioning as great long-term residents for the housing provider, even if they may have a poor credit score because of a missed payment years ago.
Rent Butter’s Incredible Potential
Just two years after its founding, Rent Butter has already made significant traction in the market with a user base comprising more than 100,000 residential units across rental properties. As the need for affordable, attainable housing continues to grow and more institutional investors enter the space, we are confident that Rent Butter will provide a much-needed solution to these challenges in the industry in the years to come. We look forward to supporting the team as they enhance their integrations and product offerings and continue to penetrate the affordable and workforce housing market to drive a more equitable future.