Accurate data is critical to affordable housing and safe communities
Some recent criticisms of evictions during the ongoing pandemic have missed the mark on the importance of resident screening and the need for accurate, timely public record data at scale to keep housing affordable and communities safe. Now more than ever, we need accurate data to promote financial inclusion, safe places to live and housing stability.
Access to rental history is vital to creating safe communities
Evictions are not exclusively about nonpayment of rent — a property owner can pursue an eviction if the resident violates the lease agreement through criminal behavior, property destruction or harassment of neighbors, among other activities. The first obligation of property owners is to provide safe, quality housing for residents. Knowledge of such past incidents is critical to housing providers achieving that goal. When a resident or potential resident jeopardizes the ability of the owner to deliver on that obligation, the owner has a responsibility to mitigate the physical and financial risk to other residents and the larger community.
Evictions are costly and time-consuming
The eviction process is lengthy and costly for housing providers — ranging between $3,500 to $10,000 — and is viewed as a last-resort option. Even if a filing is not reduced to a judgment, litigation to recover one’s property is expensive and time-consuming for housing provider and resident alike. Many housing providers have worked tirelessly over the last year and a half to help residents stay in their homes, setting up payment plans, helping residents cut through rental assistance red tape — and, in many cases, fronting the bills for months on end without a steady income stream.
For residents experiencing financial stress due to COVID-19, it’s important to proactively communicate with your housing provider and creditors to demonstrate that you’re aware of your financial obligations and taking steps toward solutions.
Affordable housing is at stake
Resident screenings are not intended to target individuals for exclusion from the marketplace — in fact, quite the reverse. The long-term goal is to advance access to quality, affordable housing. To preserve the existing housing stock and continue to build up supply, property owners must be able to assess the financial viability of a prospective resident to pay rent. According to the National Apartment Association, on average, 38 cents of every rent dollar is allocated to the mortgage, 14 cents to property taxes, 16 cents to operating expenses, 12 cents to capital expenditures and 10 cents to payroll, providing essential jobs. Without a consistent stream of income, millions of units are at risk of foreclosure and removal from the market, starting with mom-and-pop-owned properties. Provided that small owners account for much of the naturally occurring affordable housing on the market, the potential impact to the affordable market is devastating.
Evictions are just one component of a consumer’s overall rental history — but an important indicator. Limiting access to eviction records would have unintended consequences that adversely impact low-income residents, such as greater reliance on financial records and credit scores.
Rental data promotes financial inclusion
Factoring rent payments into consumers’ credit reports is an integral step in the fight for greater financial inclusion and opportunity. Credit reports, first and foremost, must be accurate and to be accurate, they must take all the data — positive and negative — into account.
A recent study by the Department of Housing and Urban Development revealed how reporting rent payments made by HUD-assisted families could significantly increase the credit standing of those consumers, creating a path to greater financial stability and increasing eligibility for loans. In one projection, the “unscorability” of credit-invisible consumers dropped from 49 percent to 7 percent when rental payments were factored into their score. Such dramatic changes in credit standing could expand access to opportunities such as buying a home or starting a business for low-income individuals.
Substantial resident protections exist under the Fair Credit Reporting Act
Federal law requires property owners to disclose if they’ve used a consumer’s credit report to inform their decision to accept or deny an application. Additionally, property owners must supply the source contact information for the report and reasoning for their decision. Such requirements hold property owners accountable to fair use of the information and protect residents and prospective residents from biased treatment.
Ensuring accurate renter history data is transparently available is of paramount importance for the good of housing stability and resident safety. Policy efforts to hide public record information about a prospective tenant’s ability to pay rent, or participate in keeping a community safe, create avoidable material risks to rental property viability and resident safety. Congress should not act to end this transparency. Further, to advance the long-term goal of financial inclusion and equity for all, rental payments must be included in credit reports. Working together, we can extend rental and mortgage opportunities for all renters.
Eric J. Ellman is senior vice president for public policy and legal affairs at the Consumer Data Industry Association.