AI Is Coming For Delinquent Renters

Property managers don’t like hounding tenants about unpaid bills. 

But as apartment owners face issues with high rent delinquencies, they need someone to do it. So some of the nation’s largest landlords have decided to turn to artificial intelligence. 

In more than 1 million apartments across the U.S., building managers are using EliseAI’s artificial intelligence chatbot to push delinquent tenants to pay their rent — and in some cases to draft eviction notices. These practices have helped boost cash flow for apartment owners, but they have also raised some ethical and legal red flags.

EliseAI Vice President of Client Strategy Jacob Kosior, who previously worked for Cardinal Group Management, said the tool automates one of the worst tasks in a property manager's typical job description.

“They knew every month they had to do it, they got people fighting them on the phone, fighting them in the office, calling in with sob stories on why they couldn’t pay rent, and that introduces a lot of human bias in those conversations,” Kosior said in an interview. “Now we’re able to remove that bias entirely with AI.” 

Brookfield has rolled out EliseAI to handle unpaid rent collections across its entire portfolio of more than 100 apartment buildings, Brookfield Multifamily Executive Vice President Rebecca Snyder told Bisnow. 

This came after it launched a pilot program in which it saw one building increase its collection rate from 97.6% to 99.6%, Snyder said, and it reached that level of collections on average 14 days faster than it did without the AI. 

She said the pilot had a “huge impact not just on the reduction in delinquency, but on actually being able to get cash in the door faster.” 

“If you have outsized delinquency, that will absolutely impact the value of your asset when you go to sell,” Snyder said earlier this month at Bisnow’s Multifamily Annual Conference East in Washington, D.C. 

“We’ve had to think at Brookfield about how do we bring down this delinquency, how do we get money in the door faster, because cash certainly matters if you have assets with floating debt,” she added. 

Rent delinquencies have become a major issue for apartment owners in recent years. In D.C., the extension of pandemic-era housing laws allowed tenants to pile up millions in unpaid rent that has put landlords’ finances at risk. Apartment owners and managers nationwide have also reported a surge in rental application fraud, with tenants using social media platforms to help them get approved for apartments where they have no intention of paying rent. 

EliseAI, a proptech startup valued at $1B in August, initially focused on the leasing process: Its chatbot speaks with prospective tenants and assists leasing managers in filling up buildings. Then last year, it launched a new rent collections vertical after doing a pilot with Cardinal Group Management. 

A year later, the EliseCollect vertical has been deployed to 1,073,000 apartment units. It has rapidly become one of the startup's most popular tools — its original leasing product is used by managers of 1,088,000 units, Kosior said. 

In addition to Brookfield and Cardinal Group, multifamily giants Equity Residential and AvalonBay Communities are also using EliseAI to handle their rent collections, he said.

Kosior previously worked on the client side of the collections partnership with Cardinal Group before joining EliseAI in August. He said Cardinal Group saw a 1.5% to 2% increase in collections from using the AI platform and that it also removed bias from the collections process and took the stress off of apartment managers. 

Snyder said leasing employees don’t enjoy calling and messaging delinquent tenants, and the AI frees them up to do other tasks. The ability to make the job more appealing for leasing staff can help attract and retain talent in what has become a competitive job market.

“It’s really hard to hire people right now, it’s a crisis in our industry,” she said. “We have the highest supply of apartments right now in 40 years, and everyone’s chasing talent.”

JLL Senior Vice President and Head of Multihousing Operations Mendowa Martin said her building management teams have used EliseAI’s leasing product, which she said has been “game-changing.”

“You want to talk about driving operational efficiencies, talk about AI leasing,” she said at Bisnow's event. “Even I have a crush on Elise. She’s all the things.”

After seeing the success of its leasing platform, EliseAI executives sought to expand the platform to more parts of the multifamily sector that were ripe for automation, Kosior said. Collections became an obvious choice. 

Many apartment managers already sent out automated messages to tenants that were behind on rent, but those messages don’t allow tenants to have a back-and-forth conversation if they have questions or concerns about their bill, or if they want to set up a payment plan. 

EliseAI can have those conversations, and it does it so well that many tenants don’t know they are talking to a bot, Kosior said. It introduces itself with a human name and only identifies itself as a virtual assistant if a tenant asks it directly.

This type of practice has caused some concern. Multiple professors of ethics and communication told The New York Times in July they see it as “risky” and “disrespectful” to have AI communicating with tenants without revealing that it isn’t human. 

National Housing Law Project Director of Litigation Eric Dunn told Bisnow he sees it as an “unfair and deceptive practice” to not have the AI reveal itself as a bot upfront.

“As a general rule, I think it’s a better practice to be clear to the tenant who they’re dealing with and ask, ‘Do you want to communicate with this chatbot about your rent?’ before you do that, rather than sort of tricking the tenant into having a conversation with what they might think is a person,” Dunn said. 

EliseAI’s Kosior said it speaks to the strength of the technology that some residents don’t know it is AI, and he hasn’t heard any concerns about it. 

“What we’re trying to solve for is providing a higher level of customer service, whether that’s AI or not,” he said. “It’s not uncommon for management companies to use automated emails for this, and this is just one step up from that.”

The collections product allows building managers to customize how frequently the AI bot will call, text or email tenants about late rent payments. If a tenant responds with a question about their bill, it will reply quickly with an answer at any hour, whereas human staff only work certain hours and take time to get to each conversation. 

“EliseAI’s product helps speed up those conversations so we can not only improve delinquency overall but really improve the velocity of payments that are taking place, so we can improve cash flow throughout the month by having more residents pay earlier as a result of the volume of communications that we’re able to do,” Kosior said. 

The AI bot even changes the tone it takes with tenants, Kosior said, depending on whether they are late on payments for the first time or are a consistent offender. 

“It’s intelligent enough to pick up on past payment behaviors and frame the conversation accordingly,” he said. “It just tends to be how friendly versus how pointed and direct the AI is in its conversation over time.”

Of course, some tenants still won’t pay the rent — even after receiving multiple pointed messages.

Building managers can have EliseAI notify them after a tenant reaches a certain number of days delinquent. Kosior showed Bisnow a communication from the AI to a building manager that said a certain tenant had an outstanding balance of $923.47 for 15 days. 

“Have you initiated the eviction process?” the AI said to the manager, followed by buttons for yes and no. 

Owners have the option to turn off the AI if somebody is moving toward an eviction, Kosior said. But they can also use EliseAI to help them draft an eviction notice that they would then put on a tenant’s door. 

“But otherwise, we’re not filing evictions, we’re just managing the conversations,” he said. “At least for now, we’re just managing conversations.”

Asked to expand on what he meant by “at least for now,” Kosior said EliseAI is looking at a range of manual processes that building managers undertake that could be automated with AI. 

“We’ll see what evolves with the eviction process across jurisdictions, but I wouldn’t be surprised if that was an area where we saw an opportunity just for efficiency gains by at least automating some of those, and doing the notices is the first step of that,” he said. 

The use of AI in evictions could create issues, given that it is a legal process that is supposed to be undertaken by licensed attorneys, NHLP’s Dunn said. 

“When you talk about drafting legal documents for the landlord … especially if the software is being supplied by a third party, is that company engaged in the authorized practice of the law?” Dunn said. “The work is legal in nature, so I think that does raise some red flags.”

While he has some concerns, Dunn said he can imagine some positives around using AI for rent collections. He noted that human property managers can also come with their own problems.

“Sometimes if you’re behind on rent, property managers can be hostile, they can play favorites, and presumably with a machine that won’t be an issue,” he said. “I don’t see it as necessarily inherently good or bad. I think there’s things that could be advantageous and that could be problematic.”