Rental Delinquency Is Climbing. Housing Costs Are Only Half the Explanation.

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10 Sep 2026

Housing affordability is the standard explanation for rising rental delinquency, and it is accurate but incomplete. Stagnant wages and rising housing costs are squeezing tenants, but according to Dana Dunford, CEO and co-founder of Hemlane, a property management platform serving landlords with one to 250 rental properties, a less discussed factor is compounding the problem: transportation. Renters who cannot afford to live near a city center often lack the transit options to commute affordably from cheaper areas, which concentrates them in higher-cost neighborhoods where they are more likely to fall behind on rent.

“Everyone talks about, in the city, we need to build more. No one talks about why don’t you just make better public transport for people to get from the outskirts in as quickly as they could get from the inner city,” Dunford says.

Hemlane’s portfolio spans multiple markets, giving Dunford a cross-regional view of how delinquency and landlord behavior are shifting in real time.

Where the Pressure Is Concentrating

The delinquency increase is not hitting all markets equally. According to Dunford, the pressure is concentrating at two extremes: markets that lack a diversified economy and high-cost metros where even elevated wages leave renters stretched thin.

On one end, she points to cities like Pittsburgh and Jackson, Mississippi, places that experienced economic peaks in earlier eras but have not fully rebuilt their job bases. “We need to bring more jobs and more opportunities to those areas,” she says, adding that factory jobs alone are insufficient without a path for workers to advance into higher-paying roles.

On the other end, markets like the San Francisco Bay Area present a different version of the same problem. Dunford notes that the commonly cited threshold for a Bay Area household to avoid living paycheck to paycheck is roughly $200,000 in annual income. Even high minimum wages fail to provide financial stability at that cost level.

The cities performing best, in her assessment, are those with diversified economies, business formation activity, and upward mobility across income levels, characteristics she attributes to markets like Austin, Houston, Tampa, Orlando, and Nashville.

Dallas and San Francisco Are Moving in Opposite Directions

Two markets have diverged from Dunford’s expectations over the past year.

In Dallas, rental prices on the outskirts have declined enough to shift the balance toward renters. New construction is adding supply, and tenants are not seeing the 10% annual rent increases that characterized earlier years. “It almost seems more like a renter’s market than I would have expected,” she says. While that creates short-term pressure for investors, it represents an affordability improvement for tenants.

San Francisco has moved the other way. During the pandemic, Hemlane’s listings in the city averaged close to 30 days on market. That figure has dropped to eight days, meaning a listed unit typically has a signed lease within a week. Dunford attributes the shift directly to the AI industry’s expansion in the Bay Area, which has drawn workers and entrepreneurs back into the city. But the same boom is creating its own affordability strain. “Unless you’ve raised $50 million, it’s really hard to make it work,” she says of new entrepreneurs trying to establish AI companies in San Francisco.

Why Rentals Sit Vacant

When a rental sits vacant longer than expected, the usual culprit is not the market; it is the landlord’s own screening criteria and pricing decisions.

Mispricing is the most common issue Dunford sees. Restrictive tenant qualifications run a close second. She describes one case where an owner set a minimum credit score of 750 on a property that would not typically attract high-demand renters. “If someone has a 700 credit score, they’re probably buying a property,” she says, noting that the requirement dramatically narrowed the applicant pool and raised fair housing concerns.

Pet restrictions are another frequent mistake. More than 50% of tenants have pets, according to Dunford, meaning a no-pets policy eliminates half the potential market. She argues landlords can hedge against damage risk through pet fees, both refundable and non-refundable, rather than blanket exclusions.

Move-in incentives have also become common. Offers like a free first month of rent, which would have been unusual five years ago, are now standard among individual landlords borrowing a tactic historically associated with large apartment operators.

Landlord Sentiment Depends on When They Got In

Whether landlords are pulling back depends almost entirely on when they entered the market and how they structured their financing.

Investors who participated in multifamily syndications during 2020 and 2021 with variable-rate loans are, in Dunford’s words, “super cautious.” Many of those deals underperformed or failed outright when interest rates rose sharply, and those investors now scrutinize every aspect of where and how they deploy capital.

Landlords who entered more recently, or who bought during earlier cycles and have since recovered, are more active. With 6% mortgage rates functioning as a baseline expectation rather than a shock, Dunford says savvy investors are focused on deal quality rather than waiting for rate relief. “A lot of people use it as an excuse not to do that work, but that’s always been the case,” she says.

What Dunford Is Watching Next

Dunford sees AI as the most immediate force reshaping property management operations, arguing that the best managers and operators will use it to work faster and more effectively. She is also watching autonomous vehicles, which she believes could reshape real estate investment patterns by making longer commutes viable, reducing the premium on proximity to city centers and potentially easing the affordability pressure she sees driving delinquency.

On markets, she remains most optimistic about the Bay Area and Seattle, citing their cultures of innovation. She is also bullish on the continued effect of remote work on smaller cities. “If you can get into these great companies and prove that you can work remotely, you could probably make a really great living in a tier 2, tier 3, tier 4 city just based on having a remote job at one of these tech companies,” she says.

For landlords navigating a market where delinquency is rising, and tenant expectations are shifting, the lever that remains most within their control is how they price, screen, and structure their lease terms, decisions that, according to Dunford, determine vacancy duration more reliably than any regional trend.

About the Expert: Dana Dunford is CEO and co-founder of Hemlane, a property management platform serving landlords with one to 250 rental properties across multiple U.S. markets.

This article is based on information provided by the expert source cited above. It is intended for general informational purposes only and does not constitute legal, financial, or real estate advice. Readers should conduct their own research and consult qualified professionals before making any real estate or financial decisions.

Residential Real Estate