Advancing an Evidence-Based Approach to Tenant Selection
Low-income renters with low or nonexistent credit scores, criminal history, or prior evictions (frequently referred to as background barriers) often struggle to access quality housing they can afford. Family Housing Fund is leading efforts to assess existing tenant selection practices across the Twin Cities and develop an evidence-based approach to tenant selection that accurately predicts risk and opens opportunities for more people to access housing. While tenant screening practices generally consider criminal, credit, and rental histories, housing providers lack empirical evidence on these background barriers and their impact on a tenant’s housing outcomes.
We are working with a broad set of partners, including community-based organizations, private rental property owners and managers, tenant screening companies, and Wilder Research, to implement three key strategies:
- Eight community-based partners are engaging Twin Cities renters to identify impact, barriers, and potential solutions. This work engages renter voices to identify background barriers preventing households from securing quality, affordable rental housing. Our community-based partners are hearing from many households who have endured multiple applications and rejections and find themselves “stuck” in poor quality housing that is not well-managed or affordable. A low credit score is one crucial and common barrier that households are identifying. In July 2018, we secured a grant from the Bush Foundation to support each of these organizations in their research and assessment of both barriers and solutions.
- FHFund is helping renter households with barriers in their credit histories in order to improve their housing opportunities and stability. In addition to helping expand credit building services for renters, we are working with private owners and managers to collaborate directly with our credit building partners to develop or adapt new credit building and renter readiness programming, to develop referral systems, and to pilot tenant selection approaches that offer opportunities to applicants who are improving their creditworthiness through educational programming and transformative personal action. One of our credit building partners is also exploring how Rent Reporting can be used to improve credit scores.
- FHFund is working with private rental property owners and managers, as well as Wilder Research, to study their tenant selection approaches, objectives, and outcomes. We are surveying private owners and interviewing public housing authorities and tenant screening agencies to understand their methods and practices. Additionally, the research will examine the profiles of individuals whose applications were denied and the reasons for denial. This information will help us understand the programmatic and policy interventions that could help more households access quality rental housing they can afford. This research is described further below.
Understanding owner objectives and approaches to tenant selection
Rental property owners typically review an applicant’s background in order to predict the likelihood of a mutually successful tenancy. Owners we interviewed define “success” as quiet enjoyment of the rental home and punctual rent payments. Most have arrived at their current tenant selection practices through consultation with legal counsel as well as their own business experience. Many owners also seek input from a third-party tenant screening agency. Some smaller owners we interviewed have struggled to find credible, cost-effective guidance on tenant selection.
There appears to be wide variation in whether and how an applicant’s income, rental history, criminal history, and credit history are utilized and prioritized by private owners and managers in the tenant selection process. For instance, some owners assign top priority to credit score, while others don’t consider credit score at all.
Many owners and managers have also developed risk mitigation practices that they use when making exceptions to their established standards, such as requiring a higher-risk applicant to pay a larger security deposit or secure a co-signer to guarantee rent payments. Some owners and managers are also willing to work with a higher-risk applicant who is actively supported by a case worker or a locally-administered risk mitigation program. Beyond Backgrounds and Stable Homes Stable Schools are local examples of such programs.
Building on recent research
A January 2019 research study, Success in Housing, quantifies the impact of certain criminal backgrounds on tenancy success in nonprofit housing. The study was conducted by Wilder Research at the direction of four nonprofit housing providers—Aeon, CommonBond Communities, Beacon Interfaith Collaborative, and Project for Pride in Living—and offers recommendations for these providers to reexamine their tenant selection policies and practices. The study found that most of the types of criminal histories permitted by the providers’ screening criteria had no significant impact on renter success, while four types of offenses (major drug crimes, fraud, assault, and property crime) may increase the likelihood of a negative housing outcome. Additional factors, such as living with children or the length of time since conviction, improved the likelihood of a successful tenancy. Wilder has also observed that this research is just the first step in this body of work, and more research is necessary to understand the relationship between a renter’s background and success in housing.
The new research we are undertaking with Wilder Research and private rental owners builds on the Success in Housing study by quantifying the utility of a renter’s credit, rental, and criminal history in accurately predicting their success as a lease holder in the private market. This project will help us develop accurate tenant selection criteria and help owners identify, manage, and mitigate risks associated with certain credit, rental, and criminal histories.
This study will help rental owners better distinguish real from perceived risks and inform our efforts to build a tenant selection system that is accurate and fair.