A major new industry is forming, thanks to a perfect storm of economic uncertainties and landlords tightening tenancy requirements — and residential leases are just the beginning.

The global online guarantor market is expected to generate $775M this year, a 10% jump from 2023. By 2032, it's expected to bring in more than $1B annually, according to Morningstar.

Online guarantors work like typical co-signers. If prospective tenants can't meet the requirements needed to sign a lease, they can turn to a guarantor the way they once turned to a parent or business partner. The guarantor attests to a tenant's ability to pay rent or its own ability to cover it if the tenant can't.

Fintech and proptech companies like TheGuarantors and Insurent are among those virtually filling the role of co-signer.

Tenants are on the hook for the company’s fee — typically between 75% and 150% of one month’s rent, according to Morningstar. And while the guarantor covers any tenant default to the landlord, the tenant will need to reimburse it.

The platforms are being used in higher education to help international students find accommodations, according to Verified Market Reports, which said the service is becoming “a regular feature in rental agreements, setting up the sector for long-term worldwide growth.”

Guarantor companies say the benefits of their platforms go beyond acting as de facto co-signers. They also handle renter qualification processes for landlords, allowing renters with unusual income streams to get housing and helping landlords decrease potential losses from rental fraud.

More than 93% of National Multifamily Housing Council members reported experiencing rental fraud in 2023, and 71% said they saw an increase in fraudulent activity.

Guarantor services can extend to commercial real estate transactions, allowing businesses to secure leases with a virtual co-signer even if they lack the capital needed.

But the surcharge guarantors require could price out prospective residential tenants struggling to pay rent. An additional month's rent payment put nearly 50% of cash-strapped Americans out of the running to use the service as of a year ago, according to Realtor.com.

Rent is skyrocketing across the nation, and not just in high-cost cities like New York and Los Angeles. Newark, New Jersey, is leading the charge, with an 8% year-over-year increase, according to Zillow data analyzed by SmartAsset. Cleveland, Columbia, South Carolina, and Fort Wayne, Indiana, are right behind in terms of rent hikes.