| Entities | Urban Institute (4) |
| Topics and Issues | Evictions (10) |
In December 2022, Urban Institute released a report, How Tenant Screening Services Disproportionately Exclude Renters of Color from Housing. I suspect that this report will add to the fodder for the ULC tenant screening committee next month, for state legislatures when they convene in a few weeks, for media, Congress, and beyond.
The report does not call for banning tenant screening, which is good, I guess, but there are other recommendations. Among the recommendations, some of which we might agree with and some we do not are. The recommendations are highlighted here and noted verbatim below:
- Positive rental payment reporting.
- Does Philadelphia’s Renters’ Access Act become a model for transparency of screening use? Does it get adopted by the ULC?
- Note Urban’s proposed research on tenant screening. Is this something CDIA studies as well?
- While the report does not suggest banning screening, it does default to regulation of screening because there is no “clear evidence” that “the screening criteria offered by third-party screening companies predict future rental payment, it seems wise to regulate their use.”
- The report does not that ban the box laws have “shown mixed results.”
- The report says there may be more promise from the “few states, including Oregon and California, [that] have passed eviction sealing legislation. These policies typically require courts to seal records in the absence of a final eviction judgment or after a few years in the case of an eviction ruling. Because of the newer nature of these policies, we are still waiting for full evaluation studies that show their impact.”
Among other things, the report notes that
For most property owners and managers, screening prospective tenants is a routine part of the application process, particularly in tight housing markets with many applicants. When surveyed, almost 18 percent of landlords said they reject more than 75 percent of their applicants and 56 percent reject at least 25 percent of their applicants. Close to 90 percent of landlords reported they checked for previous evictions, income, and job history and rental history, credit scores, and criminal backgrounds when making their decisions.
Landlords increasingly capture these data from screening services, which typically cost $40 per applicant and are most often paid by renters (PDF). Because technology has made private data more available and the rental affordability crisis has worsened, third-party screening services have become a billion-dollar industry.
The report says that “screening criteria disproportionately hurt people of color because of various structural factors,” and adds that “reports can be inaccurate.” For example,
Hundreds of lawsuits have been filed against screening companies for incorrect reports, some resulting in housing insecurity for prospective renters. The challenges of reports are linked to issues with the underlying eviction filing data, which are of notoriously low quality, with inconsistencies and inaccuracies in who’s named on an eviction filing, the outcome of the case, and the relevance of the action. Thus, screening companies may be pulling reports of maliciously filed evictions that are linked to people with common names.
And importantly, the data captured are only for eviction filings, meaning that records will appear the same for renters who ultimately won their cases and those that were evicted. An analysis of Massachusetts eviction records found that Black women were more likely to have an eviction filing that ultimately resulted in dismissal, making them more prone to be affected by such practices.
. . .
In response to coverage of…inaccuracies, the CFPB clarified that these screening companies shouldn’t use “name only” matching services that are more likely to result in inaccuracies.
Adding to the challenges for tenants was the impact of the COVID-19 pandemic. “As competition in the rental market climbed during the pandemic, many landlords reported tightening screening criteria. Corporate ownership of rental stock may have increased during the pandemic as smaller landlords struggled and multifamily unit prices dropped, and corporate owners are more likely to use automated systems.” Tenant insecurity rose dramatically during the pandemic, the report says.
The report recommends the following changes to tenant screening.
-
- Encourage positive screening criteria. Using certain screening criteria can bring risks, but leaving it up to landlords can also be detrimental. Landlords report intentionally using certain criteria as discrimination proxies, and others report relying on arbitrary and subjective criteria.
One solution is to focus on the positive behaviors that have a more direct connection to rent performance, such as rental payment history. Currently, positive rent payment reporting can be difficult to access, but there’s been movement to include history in credit scores. Fannie Mae recently launched the multifamily Positive Rent Payment reporting pilot program, which allows multifamily property owners to share positive rent payment information with major credit bureaus. This can help renters improve or build credit that can make renting and homeownership more accessible.
-
- Give renters more insight into their screening process. Tenants have the right to explain or dispute negative information in a screening report that may have contributed to their denial, but enforcing this rule can be difficult. Recognizing this issue, local leaders have passed legislation to give renters more insight. Philadelphia’s Renters’ Access Act (PDF) mandates that landlords share screening criteria before accepting an application. They also must provide a written justification for a denial along with the screening report, and renters have up to seven business days to respond.
- Gather more evidence on the relevance of screening criteria we have. We have discussed how harmful these criteria can be, but more research is needed to fully understand their efficacy and alternative criteria. Important research questions include the following:
- What indicators correlate strongly with or predict future rental delays?
- Does a previous eviction predict a future one, when controlling for contributing market factors? What should look-back periods be?
- How can screening criteria protect the financial needs of smaller and mission-based landlords while ensuring housing access for renters, particularly those who faced a setback because of the pandemic?
- Regulate and limit screening criteria. Without clear evidence that the screening criteria offered by third-party screening companies predict future rental payment, it seems wise to regulate their use. Several localities, including Newark, New Jersey; San Francisco, California; Washington, DC; and Seattle, Washington, have passed legislation that bans the review of criminal history in the entire tenant-screening process or only permits it later in the application process. The effects of these policies are still being evaluated, but study of “ban the box” legislation in hiring practices has shown mixed results. A few states, including Oregon and California, have passed eviction sealing legislation. These policies typically require courts to seal records in the absence of a final eviction judgment or after a few years in the case of an eviction ruling. Because of the newer nature of these policies, we are still waiting for full evaluation studies that show their impact.