Building a Fair and Just Tenant Screening System: Part 1 Event Summary
When an apartment becomes available, who gets to move in, and who doesn’t? Current tenant screening practices disproportionately exclude BIPOC applicants from housing opportunities and, at the same time, often fail to support landlords in reducing their tenancy failure rates.
In October 2023, Family Housing Fund invited partners to join us for a virtual panel presentation and discussion exploring research into the current state of tenant screening practices and the tenant screening industry. Our goal was to take the first steps toward informing our collective efforts around equitable housing access and outcomes, convening a community of practice, and activating champions for systems change.
Seventy people representing private and nonprofit housing providers, renters, renter advocates, policymakers, and other practitioners attended the event. We hope this event summary will inspire additional stakeholders to join us to discuss local solutions in a follow-up event to be held in January 2024.
What is tenant screening?
Family Housing Fund Program Director Kirstin Burch kicked off the event by defining what we mean when we talk about tenant screening and describing the current state of local reform efforts. Tenant screening practices are used to evaluate prospective renters and determine their likelihood of being successful in their tenancy. Criteria used in the tenant screening process are intended to help housing providers predict whether an applicant will be able to pay the rent, pay on time, and abide by the terms of the lease.
“While there is a rational business case to be made for evaluating potential tenants in this way,” Burch said, “there is limited research, policy regulation or guidance on tenant screening practices to determine what information matters in the process.”
Burch described how commonly used tenant screening practices rely on criteria that are already racially biased. Income, credit history, credit score, rental and eviction history, and criminal history are the criteria typically used. Each of these systems are ripe with well documented and persistent structural disparities. As a result, BIPOC applicants are disproportionately excluded from housing opportunities even though these criteria do not have a proven predictive value for tenancy success.
“This has created a fair housing issue that our region has not fully grappled with,” Burch said.
She went on to describe the state of the for-profit tenant screening industry in the United States. There is an entire industry of tenant screening companies that have not been subjected to sufficient regulation. These companies source information about applicants and produce a tenant screening report that many housing providers rely on to make decisions. It is common for these companies to generate a final “risk score” as part of the report, which is intended to give the landlord an estimate of the likelihood of tenancy failure based on the detail provided. Housing applicants are rarely given access to these reports, resulting in a system with little insight into issues preventing them from securing rental housing nor recourse if there is outdated or erroneous information in the report. Importantly, there is little evidence that tenant screening reports are a good predictor of tenant success.
Local research and projects to support equitable tenant screening practices
Over the past five years, Family Housing Fund has invested in a body of work to explore best practices and reforms that could result in more equitable tenant screening. This work has included investments in local efforts like Housing Justice Center’s Renters Reclaim the Record initiative and HousingLink’s Beyond Backgrounds program (both described below).
In addition, Family Housing Fund and our partners have led research that has begun to inform local efforts for tenant screening reform. In 2021, we released our report “Opening the Door: How Tenant Screening and Selection Works in the Twin Cities Metro Area and Opportunities for Improvement”, which explored the business purpose and objectives of housing providers’ tenant screening practices, as well as highlighting the negative impacts of limited regulation of the tenant screening industry.
More recently, Family Housing fund worked with Wilder Research and four large private housing providers to conduct further research to identify which background characteristics have a significant effect on housing outcomes and which are irrelevant in predicting housing success. This study research was in follow up to Wilder’s 2019 Success in Housing study, which was conducted with nonprofit providers. The goal was to dig deeper into the nuances of the four common criteria and ensure that private market operating realities were accounted for in the research. Unfortunately, the research project was inconclusive due to data limitations, namely the inconsistencies between the way the data was tracked across the participating providers. However, one observation that we gleaned from the research effort was that nonprofit and for-profit housing providers experienced comparable tenancy failure rates at 14 and 15 percent, respectively.
“This suggests that current practices may fail to support the risk mitigation priorities of landlords and frequently fail to predict successful tenancies,” Burch said.
The research also revealed that accepted renter applicants were more likely to be white with or without a criminal history, which provides additional evidence of racial discrimination.
New tenant screening research
In our quest to develop more effective tenant screening practices, Family Housing Fund also presented and invited researchers to share about new research that may inform our local reform efforts. There are many angles to look at tenant screening from and many stages of the process where applicants can run into problematic practices. Presenters at the event explored the ways discrimination can present itself at multiple steps in the process.
Consumer Financial Protection Bureau Studies
To begin with, Burch presented findings from two Consumer Financial Protection Bureau (CFPB) briefs produced in 2022 (available here and here). The reports highlighted the prevalence of errors and false information in tenant background checks by analyzing 24,000 consumer complaints. Both reports revealed that people are routinely denied rental housing because of erroneous information, outdated information, and inaccurate or misleading details about arrests, criminal records, and eviction records. This indicates that tenant background check content is harmful to many prospective tenants and has questionable relevance for landlords.
In addition, while renters are paying for these reports, they often are not given a chance to see them and struggle to get errors fixed—in fact, these studies revealed that renters submitted more than 16,000 complaints about incorrect information on their reports and another 4,500 complaints about the obstacles they faced when trying to get companies to fix those errors. According to the reports, renters often do not receive adverse action notices, which is a legal right under the Fair Credit Reporting Act.
Which Information Matters? Measuring Landlord Assessment of Tenant Screening Practices
Family Housing Fund invited researcher Wonyoung So of the Department of Urban Studies and Planning at the Massachusetts Institute of Technology to present his research paper “Which Information Matters? Measuring Landlord Assessment of Tenant Screening Reports.” This study analyzed how landlords use tenant screening reports to make decisions about rental applicants.
So explained that in 2016, HUD issued new guidance that prohibited landlords from blanket tenant screening practices, such as rejecting all applicants with a criminal record. In essence, the guidance required landlords to conduct individual assessments for each applicant, with the intention of reducing known racial biases that such blanket policies can create.
So’s research explored what information on tenant screening reports results in the exclusion of applicants for rental housing—and specifically, how landlords view applicants’ prior evictions and criminal records in this process. He created a simulated tenant screening report for use in a behavioral experiment with a group of more than 200 landlords. He developed three types of reports to test:
- The first showed criminal and/or eviction records with no detail and no risk score.
- The second showed the same records with detail and with a risk score.
- The third showed the same records with detail but without a risk score.
Each participating landlord was shown one of the three types of reports for 25 applicants and was asked to accept or deny each application.
So’s study resulted in two significant findings for practitioners working to eliminate racial bias in the tenant screening process. First, many landlords displayed use of the prohibited blanket screening policies in the evaluation process. Even when detail was provided that was favorable to the applicant (for example, that an eviction had been filed against them but had been settled), landlords viewed this information as negative in assessing the application.
Second, landlords displayed an automation bias, with statistically significant evidence that they relied on risk scores when one was presented to them. In other words, landlords were more likely to decide not to approve an applicant based on the displayed risk score, even when presented with detailed information that was favorable to the applicant.
In summarizing this research, So sounded an alarm about how much power tenant screening reports have in deciding who gets access to rental housing compared to how little regulation currently exists to eliminate racial discrimination in this process.
“One of the things I’m really concerned about is… the recommendations and scores generated by tenant screening services because it’s unregulated,” he said.
The Impact of Renter Protection Policies on Rental Housing Discrimination
Marina Gorzig and Deborah Rho presented their research “The Impact of Renter Protection Policies on Rental Housing Discrimination,” conducted on behalf of the Opportunity and Inclusive Growth Institute at the Federal Reserve Bank of Minneapolis. This study analyzed discrimination by landlords in the pre-application phase, when prospective tenants first inquire about a rental listing.
The researchers set out to understand the impact of policies that reduce the use of information on discrimination in housing. In an effort to equitably increase housing access for renters, the Minneapolis City Council passed an ordinance that limited the use of criminal history, eviction history, and credit scores in the tenant screening process. Among the inclusive screening criteria guidelines, landlords:
- Cannot use blanket exclusionary screening criteria
- Cannot consider misdemeanors that are older than three years and most felonies older than seven years
- Cannot consider evictions older than three years
- Cannot use credit scores to disqualify applicants
- Cannot exclusively require income three times the rent
The researchers crafted a correspondence study using racially identifiable fictitious names to respond to Craigslist rental ads by email, beginning before the policy was enacted and continuing after it took effect, to identify if there was a change in discrimination against BIPOC housing-seekers after the implementation of the Minneapolis ordinance.
Gorzig and Rho found evidence of racial discrimination both before and after the implementation of the policy, as landlords were more likely to not respond to inquiries from African American and Somali American sounding names. After the ordinance went into effect, landlords displayed compliance with the requirements demonstrating decreased overt discrimination, such as eliminating the use of blanket statements like “no criminal records” in a rental listing. However, they also observed racial discrimination worsened in the response rate, specifically against inquirers with African American and Somali American male names. The difference between the positive response rate for white people and African Americans increased by about 18 percentage points and the gap between white people and Somali Americans increased by 20 percentage points after the policy went into effect for applicants seeking two or more bedroom units. Additionally, the largest increases in discrimination occurred in census tracts where there were large populations of Black residents.
These findings suggest that after the ordinance was in effect, landlords could no longer rely on exclusionary screening criteria as a tool for disqualifying Black applicants and therefore chose not to respond to inquiries in order to avoid receiving applications from Black or Somali renters. In essence, some landlords appear to have responded to the policy change by shifting exclusion rooted in perceptions of risk and discrimination to earlier in the housing search process, from the background check phase to the pre-application phase. This shows both the limitations of policy in addressing entrenched racism and bias, and how important it is that we evaluate the impacts of policy changes so we can be sure that we are achieving intended outcomes and not perpetuating further harm. Our region still needs further tenant screening reform to root out discrimination and create an equitable process for tenant selection.
“The policy has probably benefited some people and harmed some people,” Gorzig said. “I would step back and say, can we think bigger? Can we think of something that would have the good parts without the bad parts?”
How can we use this information to craft better tenant screening policies?
In January 2024, Family Housing Fund will reconvene practitioners to discuss how we can use the research findings and our own local experiences to create policies, practices, and programs that work better for renters and landlords. Our goal is to take the first steps toward informing our collective efforts to disrupt harmful and ineffective practices, re-conceptualize risk, and improve housing access and outcomes for renters and landlords.
In Part 2 of the event series, partners will present on existing local efforts to combat racial discrimination and disparate access in the tenant screening process.
Renters Reclaim the Record
Housing Justice Center’s Renters Reclaim the Record provides direct assistance to applicants who have been denied access to rental housing opportunities based on tenant screening report issues. This program provides insights about the extent to which incorrect or insufficient information provided to housing providers from tenant screening agencies contributes to housing denials. HJC attorneys also help renters who have been denied housing with expungements and the removal of erroneous or irrelevant information from their background reports.
Beyond Backgrounds
HousingLink’s Beyond Backgrounds program provides renters with background barriers with housing navigation support and offers financial assurance to housing providers to reduce the financial impact of an unsuccessful tenancy. This work is facilitating greater housing access for renters with who otherwise face exclusion and is building the basis for demonstrating that renters with perceived barriers are not necessarily riskier tenants.
Together, Family Housing Fund, Housing Justice Center, and HousingLink are launching a bold three-year project that will fundamentally shift mental models about risk and the efficacy of tenant screening practices among key housing stakeholders to collectively advance a future where tenant screening and selection is fair, just and promotes housing equity for all. Join us for Part 2 of this webinar event series to learn more about our next project and help inform our approach.
