Beyond full units: The key to strong economic occupancy

It’s an increasingly common scenario: a multifamily operator offers a rent concession to get a new resident through the door, only for the renter to default six months later.

This focus on physical occupancy often comes at the expense of economic occupancy, which measures actual revenue collected after factoring in elements such as concessions and delinquencies, said Mitch Towbin, Vice President of Strategic Partnerships at TheGuarantors.

"Operators need to focus on strengthening economic occupancy, ensuring that their residents are contributing positively to the bottom line,” he said. “True profitability isn’t just about keeping units full — it’s about reducing bad debt and protecting rental income. The solution lies in better use of technology to minimize the risk of resident defaults, limit reliance on concessions and make renting more accessible for people.”

There are two main reasons why economic occupancy is getting harder to achieve in 2025, Towbin said. First: the rise in living costs nationally.

Defaults on credit card loans are at their highest level since the 2008 financial crisis, and lenders wrote off $46B in seriously delinquent loan balances in the first nine months of 2024. People are struggling to maintain their lifestyle, which includes renting an apartment, Towbin said.

While overall late fees in rental housing have declined from their peak in early 2023, in 2024 nearly 14% of renters incurred a late fee. Severe delinquencies such as outstanding balances and write-offs continue to impact operators.

“The bad debt caused by defaults is hurting multifamily operators,” Towbin said. “It highlights the growing financial pressure renters face in securing and maintaining their apartments amidst the rising cost of living.”

A second reason operators are struggling to maintain economic occupancy is greater competition. Multifamily construction starts increased 59% from November to December 2024, while more than 500,000 new apartments were predicted to have been completed in 2024. This is why operators are resorting to rent concessions to attract and retain renters, Towbin said.

“While rent discounts may draw people in, they often come at a cost,” he said. “While they might bring people through the door, the risk of resident defaults is even higher as they might not be able to afford the true rent. It’s going to put downward pressure on operating income.”

Towbin suggested several strategies to attract renters without over-relying on concessions. Operators could offer alternative rental models, such as short-term rentals or the offer of a furnished apartment for people who are more transient. Some operators are converting empty apartments into a gym, playroom or library to give occupants a greater level of amenity.

“All these measures boost a brand and property’s reputation,” he said. “This will serve them well, not only to attract new residents but to retain those who have already been in the community. If they’ve had a good experience, feeling the responsiveness of the operator, they’re more likely to stay.”

Leveraging technology is the most effective way to maximize economic occupancy, Towbin said. On a building management level, this might include the use of chatbots to respond to service requests or providing virtual viewings and digital access control. Technology can also streamline payment operations or provide different payment options.

TheGuarantors’ ability to leverage data underpins the solutions it provides to multifamily operators and their residents, Towbin said. Rent Coverage acts as a lease guarantee, helping increase occupancy at no cost to the owner or operator. It widens the pool of qualified renters, without the added risk or need to offer rent concessions that can come with traditional vetting methods.

Deposit Coverage allows renters to replace the cost of a traditional security deposit with a smaller fee while protecting owners and operators. It covers missed rent if there’s a default and covers any damages that a security deposit would be used for.

Overall, TheGuarantors’ product suite helps operators minimize bad debt, strengthen economic occupancy and combat fraud, creating a more secure and financially resilient portfolio, Towbin said.

“These solutions help operators sleep at night,” Towbin said. “They’re an incredible tool for helping a leasing team with velocity, as well as with operations and asset management. If something goes wrong and a resident defaults, you have a bond that covers you.”

TheGuarantors’ products extend beyond insurance solutions, the costs of which are covered by residents. The company also has a mitigation team dedicated to helping renters who fall behind on rent avoid default.

“Our solutions aren’t just about turning a no into a yes and qualifying an individual just to put heads into beds,” said Towbin. “We don’t just have a bond with the operator — we help renters through the entirety of their renting journey, especially those facing financial hardships.”

Using a combination of technology solutions and products from TheGuarantors, Towbin said, a multifamily operator can meet their long-term goal: to achieve economic efficiency while providing much-needed homes for as wide a pool of residents as possible.