Boston—Neighborhood Pay Services (NPS), a financial service provider for the multifamily industry, recently announced its new service Rent Assurance. MHN spoke with Richard Levitan, president, NPS, on how this new service can aid residents who have less than perfect credit pay their rent in full and on time.
MHN: Describe NPS and the new service you’re providing.
Levitan: NPS is a company that’s focused exclusively on developing tools for the multifamily industry to improve resident performance when it comes to paying rent on time. That’s the mission of the company from a client perspective. We are also designing and developing these tools not only to help our clients have better resident performance, but also to help their residents gain access to rental apartments that they might not otherwise be able to get access to on their own, given that our priority focus is on those residents and perspective residents with less-than-perfect credit. There’s a big, big market out there for folks who are credit-challenged, and the challenges they have to get decent rental housing is something we’ve been focusing on and designing our products around.
The [new] service is called Rent Assurance. This product is designed to enable owners of multifamily housing to offer more attractive lease terms to the residents with less-than-perfect credit. Rent Assurance assures that the owners and operators will get paid on time. The Rent Assurance program is based on a proprietary payroll direct deposit platform. The key differentiation between what we’re doing and a traditional direct deposit program is that this is based on a proprietary payroll direct deposit platform. When a prospective resident or an existing resident who finds himself getting behind or getting in trouble, they enroll in our service, and they’re agreeing to have their rent deposited into an account that we open on their behalf every payroll period—so a prorated portion of their rent is deposited from their employer into an account. We manage that account and we give that money to their landlord on a monthly basis, on time and in full. That is where the assurance promise comes from.
MHN: Could people opt out? How long do they sign on for?
Levitan: The resident who enrolls in our service is enrolling in the service as a part of their conditional lease offer from the landlord. In those terms, what they’re agreeing to do is to sign for the entirety of their lease terms. We see our customers’ average life [with our service] being a little less than 400 days, so they are signing up for our service, they’re using our service to fulfill lease obligations, and they are doing so for the entirety of the lease. Can they walk away from it? Our customers know that it’s built in to their lease. So if they stop using the service—and they’re all doing this voluntarily; this isn’t mandated—it’s grounds for eviction or issues for them.
MHN: But if they do opt out in the middle of the lease, could they pay their rent by themselves?
Levitan: When they enroll we receive that deposit from their payroll weekly, or in some cases once a month because we have customers who are receiving their social security benefits or pension benefits. Most of our clients have [our service] built into the lease terms. For example we have one client who is discounting the upfront money required to sign a lease with somebody who signs up with our service by as much as $1,000. So they are signing leases with folks with less-than-stellar credit for $1,000 less up front than they would otherwise. They build into the lease that if those residents should stop using the Rent Assurance program, they’re then obligated to fulfill that up-front discount that they received, and if they don’t, it’s grounds for eviction.
We don’t ask much of our clients. We’re a web-based platform. There’s no technology integration. We don’t ask for any up-front fees from our clients to engage, we don’t charge fees to manage the service. Each of our clients manages the offer in a way that really gives their prospective residents a significant benefit at the onset of a lease. The non-profit mission of our company is to improve the opportunity for folks who are down on their luck or have bad credit, but have a job. They can pay rent, but they’ve got an issue that’s going to require a lot of money upfront, and that’s why we designed this service. We can help them get into a unit without having them dig so deep that after they come up with the upfront deposit money, they almost immediately are in trouble.
MHN: What about students? Would they be a group that could benefit from the Rent Assurance program?
Levitan: It depends on the type of student. We have a few properties that are student-based properties, but these are students who are in internships where they have an income, because the whole program is based on receiving payments from payroll into this account that we’ve established. Without some form of income, we can’t help. We can’t help someone who’s getting paid under the table or paid in cash. We can help anyone who is working for the government, who’s working for Walmart, who’s working Radio Shack, whomever it may be, as long as they are W-2 employees, who receive a paycheck.
MHN: This service seems like it would make paying rent easier for anyone, including people who have good credit—then they wouldn’t have to think about writing a check every month. Would it ever be a consideration to offer the service to everyone?
Levitan: Absolutely, and in fact we have a few clients who actually offer us to everybody. There’s this peace-of-mind element that comes along with being one of our clients, where as long as you continue to be employed, your rent’s going to be paid on time every month in full, and you don’t have to worry about it. You don’t have to worry about the late fees; you don’t have to worry about anything. We have a couple of clients who make all of their prospective residents aware of the service. There are some residents who don’t get the benefit I shared earlier in terms of the lower up-front costs to gain access to a lease that do sign up for the service. But the majority of the customers we have do have a significant burden they’ve got some issue with their credit.
Our clients see value in our service in a couple of different dimensions. Because they have this assurance that rent is going to be paid on time and in full from prospective residents who mostly have less-than-stellar credit, more of those perspective residents say yes. One of the things that all of our clients see in the service we provide is a way to capture some incremental occupancy. Even if they’re at 94, 95 percent, which a lot of people are right now, our clients we work with are interested in maximizing the profitability in their communities and squeezing another 50 basis points or 1 percent of incremental occupancy. Most of that revenue—if not all of that revenue—drops to the bottom line. It’s one significant value-add that our clients see in our service and are able to capture. The other is that you can put it into a lower operating expense in terms of the cost of money that’s not in the bank day three or day four of the month because it’s dragging on and on. For our customers who are part of our program, they don’t have to worry about that.