Background Checks and Social Effects: Contemporary Residential Tenant-screening Problems in Washington State

• Publication year: 2010

§ Fall/ Winter 2010-#13. Background Checks and Social Effects: Contemporary Residential Tenant-Screening Problems in Washington State

Washington Seattle Journal For Social Justice
Volume 9, No. 1
Fall/ Winter 2010

Background Checks and Social Effects: Contemporary Residential Tenant-Screening Problems in Washington State

Eric Dunn and Marina Grabchuk

Introduction

In October 2007, the website FreeCreditReport.com-not to be confused with the publicly mandated annualcreditreport.com(fn1)-launched a series of television commercials featuring a young singer who laments having neglected to watch over his credit report. He is turned down for jobs, loans, and in one spot, housing:

Well I married my dream girl, I married my dream girl

But she didn't tell me her credit was bad

So now instead of living in a pleasant suburb

We're living in the basement at her mom and dad's

Now we can't get a loan for a respectable home

Just because my girl defaulted on some old credit card

If we'd gone to free credit report dot com

I'd be a happy bachelor with a dog and a yard.(fn2)

Some might agree with the singer-that he should have run his fiancee's credit report before saying "I do." Others might find the thought revolting. But there is no denying the jingle's underlying premise: poor credit absolutely can doom a young couple's dreams of moving into their own home. And though most families who cannot qualify for a home loan would probably sooner rent an apartment than live in their parents' basement, unfavorable credit reports are no less a barrier to obtaining rental housing.

Indeed, those seeking housing in today's rental market find it, in some ways, even more difficult than qualifying for a mortgage. Loan applications are approved or denied almost exclusively on the basis of financial criteria. Rental applicants, however, must usually also satisfy a series of inquiries into matters of character, lifestyle, and personal history. This has long been the case, but modern information systems have vastly expanded the amount of information available to landlords about prospective tenants and the warped speeds at which that information can be obtained,. In today's age of online public records and digital transmission, a rental applicant's complete residential history, credit report, criminal record, civil litigation background, and other information are available within hours or even minutes, and in Washington, all at the prospective tenant's expense.(fn3) Some landlords access this information directly from public websites and databases; however, most contract with tenant-screening services (a subset of the consumer-reporting industry) to cull records from various sources and prepare custom "tenant-screening reports."

These technologies have revolutionized the processes by which rental housing providers choose tenants, supplementing or even replacing traditional tenant-screening tools like written applications, personal interviews, or phone calls to past landlords. Today's residential landlords are able to choose their tenants much more selectively than in the past, and do so in hopes of reducing the risk of leasing to a tenant who will default in rent, damage the premises, or be otherwise problematic. As is common with technological advances, however, these benefits have come at significant, though largely overlooked, social costs.

In Washington, individuals and families are frequently denied housing due to inaccurate or misleading background reports that they have no practical way of correcting.(fn4) Other potential tenants are deterred by or unable to afford screening fees, which, if they pay and are rejected at one property, they must pay again to apply elsewhere.(fn5) Still others find they are simply unable to rent at all; they are disqualified from the rental market almost entirely due to past eviction lawsuits, criminal prosecutions, domestic violence protection order cases, poor consumer credit, or other disfavored characteristics.(fn6)

In Washington, unfavorable tenant-screening reports probably do not deter too many marriages among perfectly matched mates, but they do keep plenty of people living in their parents' basements. Contemporary tenant-screening practices (and the exclusionary policies they support) also swell the ranks of the homeless,(fn7) frustrate offender reentry programs, deter domestic violence survivors from leaving abusive partners, chill existing tenants from asserting basic legal rights, and cause other significant public policy effects Washington can scarcely afford to ignore.

This article will take a deeper look at these problems, how they arose, and possible methods to address them. Part One looks at current residential screening industry practices, including common tenant-selection criteria, and the procedures and information sources that landlords use to evaluate applicants. Part Two will detail how these practices lead to social problems, such as unfair rejections for rental housing or the collective effects of disqualifying people categorically from broad sections of the rental market due to criminal records, eviction cases, or poor credit. Part Three examines the limited strengths and numerous drawbacks to the few potential legal remedies for frustrated rental applicants under existing U.S. and Washington law, including theories under the Fair Credit Reporting Act, Washington's Residential-Landlord Tenant Act and Consumer Protection Act, fair housing statutes, and privacy claims. Finally, Part Four discusses possible legislative solutions that, if enacted, could mitigate abusive tenant-screening practices in Washington, such as proposals for "portable screening reports," enhanced procedures for sealing judicial records, and expanded protection for tenants under the Fair Credit Reporting Act.

I. Current Industry Norms

Tenant-screening policies typically entail two components: a set of criteria for accepting tenants and a method for determining whether a particular applicant meets those criteria. Both aspects profoundly affect how rental housing opportunities are distributed in Washington.

A. Tenant-Selection Criteria

The purpose of tenant screening is to predict the likelihood that a particular rental applicant will make (what the landlord considers) a "good tenant." To this end, the criteria landlords use for selecting tenants can range from amorphous judgments about an applicant's desirability to formal admission policies that evaluate applicants across a wide spectrum of factors. But most of the time, rental criteria relate to the essential requirements of residential tenancies like paying rent and complying with basic rules. Despite variations from one housing provider to the next, basic criteria usually fall along the twin axes of financial suitability and behavioral suitability.(fn8)

Financial suitability means being able to meet the anticipated pecuniary obligations of the tenancy.(fn9) This most obviously includes rent, as well as other expected expenses such as utility bills, security deposits, renter's insurance (if required), and so on. Some landlords may also consider whether the applicant would be likely to pay a claim or judgment in the event of damage to the premises, early lease termination, or other breach.(fn10) Many housing providers assess financial suitability using mathematical formulas or thresholds (e.g., monthly gross income of two-and-a-half to three times the rent is common).(fn11) An applicant may also need to demonstrate that the income is reliable, such as through a minimum duration of employment.(fn12) Some landlords may require a cosigner or extra security deposit for applicants whose financial qualifications are marginal.(fn13) Notably, many housing providers refuse to accept tenants who rely on child support, government housing subsidies, welfare benefits, or certain other often-stigmatized income sources.(fn14) Even assuming the tenant has the financial resources to afford the rent and other bills, a history of late payments, debts-especially to former landlords-or other adverse credit history can disqualify a rental applicant.(fn15)

Behavioral suitability means satisfying the housing provider that the applicant will follow the rules, fulfill other nonfinancial obligations of the tenancy, and live harmoniously in the community.(fn16) This determination is typically based on an applicant's history at previous residences, as shown by interviews with the applicant, with prior landlords and other references, and, especially, with various background reports such as civil litigation records, criminal histories, and credit scores. Applicants who receive critical reports from past housing providers or who cannot demonstrate a stable residential history are generally treated less favorably.(fn17) Applicants with acute blemishes such as bankruptcies, foreclosures, eviction records, or felony convictions are often categorically excluded.(fn18)

B. Screening Methods and Information Sources

Today's landlords commonly obtain the reports that facilitate the use of both financial and behavioral tenant-selection criteria from background-check providers,(fn19) many of whom specialize in so-called "tenant screening" and others who also conduct pre-employment screening and other types of consumer reports.(fn20) Tenant-screening companies can provide residential landlords almost-instant access to extensive background information about...