The latest TransUnion Rental Screenings research found that renters are not a greater risk as rents rise, as one might expect. Actually the opposite occurred last year:  higher rents mean lower risk.

Transunion found that average rental prices have increased nearly 4% from $1,034 in Q3 2012 to $1,072 in Q3 2013. The credit risk of applicants to those properties as measured by TransUnion’s Resident Scoring Model has steadily improved, with an average improvement of 1% in the last year.  National data on rental applications was collected from property managers for the same properties utilizing TransUnion’s rental screening solutions in both September 2012 and September 2013.

“The rental market continues to be strong as demand for rental units remains high while consumer credit risk slowly improves,” said Michael Doherty, senior vice president of TransUnion’s rental screening solutions group. “The combination of improving rental risk scores and continued demand for rental properties is particularly good news for property managers.”

Rental price changes were noted among the four primary levels of rental properties, including: Level A (newer, institutional properties), Level B (older, institutional), Level C (older, less desirable area) and Level D (older, less desirable area, renovations/updating needed). All four property levels experienced increases in their rental prices. While rental prices increased in the last year, the credit risk of residents in those properties has also improved.

The credit risk of residents also improved across the board with all levels seeing rises in the TransUnion Resident Scoring Model: Level A — up 0.9%; Level B — up 0.3%; Level C — up 1.3% and Level D — up 1.7%.

“As property managers determine the criteria for what types of residents they want for their properties, it is valuable to have a basic understanding about the risk level of the rental population,” said Doherty. “When the credit risk of the population improves, property managers may be more inclined to tighten their criteria to ensure they are getting the best possible resident. This is integral because a resident who ‘skips’ out on a lease can cost a property manager thousands of dollars in lost revenues.”

TransUnion’s analysis also observed trends in key markets such as Chicago, Los Angeles and New York between Q3 2012 and Q3 2013.  Chicago – Average rental costs increased nearly 5% from $1,345 to $1,411. Credit risk remained the same.

• Los Angeles – Average rental costs rose 3.2% from $1,565 to $1,615 while credit risk improved 1.1%.
• New York – Average rental costs increased 5.5% from $2,389 to $2,520. Credit risk improved slightly by 0.4%.

“We noticed that the improvements in credit risk and the rise in rental payments was not a regional trend, rather most markets experienced similar improvements,” added Doherty.