Affirm, rent lenders expand short-term housing credit as U.S. affordability pressure grows

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Affirm & rent lenders expand credit

Highlights

Affirm partnered with Esusu to pilot rent-split loans as demand for short-term housing credit rises amid sticky inflation and weak income growth.
Flex reported processing $37 billion in rent payments since 2019, while nearly 53 per cent of its users have less than three weeks of emergency savings.
A Harvard study found 83 per cent of renters earning less than $30,000 spent over 30 per cent of income on rent and utilities in 2024, heightening affordability concerns.

Rent-split lending gains traction

As first reported by the Financial Times, fintech companies are pushing further into rent financing with products that break monthly housing payments into smaller installments over the course of the month. Affirm, one of the largest U.S. buy now, pay later lenders listed on Nasdaq, recently partnered with Esusu to pilot rent-split loans, while three other companies focused on the segment said their customer bases are expanding quickly.

These products typically allow lenders to cover a tenant's monthly rent payment to a landlord and then collect repayment in installments. Wemimo Abbey, Esusu's co-founder, said the loans are aimed at people working freelance or gig economy jobs whose income arrives on irregular schedules, arguing that many borrowers can afford rent but struggle with payment timing.

Abbey said sticky inflation and weak income growth are supporting demand for the product. Flex, another lender in the segment, said it has processed $37 billion in rent payments since its 2019 launch.

Housing strain and borrower risks

The expansion comes as the U.S. housing market remains under pressure from limited home construction and four years of high interest rates that have made mortgages more expensive. Lower-income renters are under the greatest strain, with a Harvard University Joint Center for Housing Studies study published this year showing that 83 per cent of renters earning less than $30,000 spent more than 30 per cent of their income on rent and utilities in 2024.

The pressure also extends to homebuyers. Data from the National Association of Realtors shows the typical age of a first-time buyer has reached a record 40, underscoring how affordability barriers are reshaping the housing market. President Donald Trump has made housing affordability part of his agenda before November's midterm elections, with measures aimed at speeding up homebuilding and limiting institutional purchases of single-family homes.

Consumer advocates say rent-split loans can leave vulnerable borrowers worse off through hidden fees and high interest rates. Mike Pierce, executive director of Protect Borrowers, said people who cannot pay rent now are unlikely to be better able to pay later, while lenders argue they serve underbanked consumers whose alternatives include late rent penalties, overdraft fees, payday loans and subprime credit cards.

Flex said nearly 53 per cent of surveyed renters using its service would have less than three weeks of emergency savings if they lost their income source. The company said its average customer has a credit score of 602, a level many lenders view as higher risk, and Split Pay said it hopes to use rent repayment data to eventually offer lower-interest credit cards to its clients.

Our earlier article on the Morgan Stanley Residential Mortgage Loan Trust 2026-NQM6 securitization detailed a planned RMBS deal backed by 794 first-lien home loans totaling about $374.2 million, mixing prime and nonprime collateral and including a sizable non-QM share. We outlined the deal’s preliminary ratings across tranches, the sequential-pay structure and credit enhancement levels, and key risk factors such as investor-property exposure, DSCR/nonprime features, and servicing and risk-retention mechanics.

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