Renting an apartment was never fun, but these days it's downright brutal.
It begins with a strip-search of one's personal data, a "privilege" for which the renter pays via a $35-plus screening or application fee, moves through an automated revenue-management system that imposes upon him the highest possible daily market rent and ends with add-ons such as mandatory renter's insurance, multiple pet fees or extra coverage for the owner's pool lest another tenant cause damage.
"It's intimidating," says Ken Volk, who analyzes 20-page leases for tenants as president of Arizona Tenants Advocates, a tenant services company in Tempe, Ariz. "It makes it so people can't afford to get into a lot of places, because of all the extra fees."
Online data — easily and cheaply shared — means apartment managers can adopt ever-more sophisticated tools to minimize their risk and boost profits. And if some of these practices are common only among large outfits today, the tipping point is within sight. Soon they will be standard. They include:
- Rents that change from day to day.
- Rental-specific credit scores.
- Checks of criminal, sex-offender and terrorism databases.
- Checks of housing courts, eviction notices and rental histories.
- Income verification that can include pay stubs, letters of employment and tax returns.
- Fees that effectively raise monthly rents.
"The world is flush with more information today than we've ever had, and the same thing is happening with the apartment industry," says David Cardwell, vice president of capital markets and technology for the National Multi Housing Council, a trade association of large apartment developers and managers. "Information management has allowed a lot of business activities to be centralized, and apartments are no different."
Easier to get a home loan than a rental
Tony Drost, owner of First Rate Property Management in Idaho, used to walk apartment applicants to their cars. "If it was littered with McDonald's bags and was a complete mess, I wouldn't rent to them. To me that was an indicator of how they lived," Drost says.
"These days you can't do that, because of Fair Housing," he says. "Now you have to quantify it. That hunch stuff is very hard to quantify."
Fair housing laws are not new, but the anti-discrimination protections are often credited with the soaring popularity of so-called objective background-screening programs available today.
Apartment managers can punch limits — legal ones, based on income or criminal or rental infractions — into a computer. A background screen checks an applicant's history against those limits and spits out "accepted," "denied" or "accepted with conditions."
As long as the apartment manager applies the same limits to everyone, it's presumably difficult for those denied to allege discrimination.
To protect privacy, no one sees the details. If you're the rejected applicant, you can contact the screening company directly for details by mail. By law, inaccuracies must be cleared up, usually within 30 days. (Hopefully you have a place to live until then.)
Perhaps more importantly, these programs are now cheap. Background-screening companies have had a few years to consolidate, and the big fish can offer a comprehensive check for as little as $15.
- Criminal history: Screeners cross-check an applicant's prior addresses from credit reports with state and local public-safety and court records.
- Sex offender registry: Every state maintains a public list.
- Terrorist and other most-wanted lists: The federal government’s Terrorist Screening Database is confidential, but the U.S. Treasury’s list of "Specially Designated Nationals" — those suspected of financially supporting terrorists — isn’t, said David Carner, senior vice president of LeasingDesk, a screening company. That list gets checked, as well as public lists through the FBI; the U.S. National Central Bureau of Interpol; the Secret Service; the Bureau of Alcohol, Tobacco, Firearms and Explosives; U.S. Customs and Border Protection; and others. (A recent Justice Department audit found the Terrorist Screening Database, with more than 900,000 names, was flawed and contained names of people already cleared from suspicion.)
- Eviction history: Several firms troll housing courts nationwide and sell data to screening companies. Apartment managers can choose to decline anyone named in a housing case, even if the tenant was not found at fault.
- Credit history: Screening companies access these reports and often create their own financial score using payment patterns deemed relevant to renting.
- Income in relation to rent: Outstanding debt, such as loan payments, and additional income is scored relative to the proposed rent and fees. Property managers often require original pay stubs — to combat forgery — as well as letters of employment, or tax returns for the self-employed. In the future, employees' past income may also be part of an income-verification database, Carner says; companies are starting to aggregate that information now.
- Rental history: Services such as LeasingDesk — a product of RealPage, which also manages properties — have access to tenants' rental history, which they can consider as well. RealPage already has more than 8 million tenants in its records and captures the rental history of about a quarter of apartment applicants. The volume of this data is expected to grow.
Big apartment complexes check most, if not all, of these factors, as do independent managers of smaller properties. (In Idaho, Drost says he's been rejecting about half of his applicants lately.)
"There are more property managers getting together, we're seeing where the loopholes are and we're closing them up," says Sylvia Hill, past president of the National Association of Residential Property Managers, which has grown to 3,000 members from seven in 1989. "It's a lot more difficult for somebody — who doesn't have the good credit, doesn't have the income — to rent because there are a lot more people to check who are professional."
Before mortgage lenders tightened their standards last year, it wasn't uncommon to hear stories of people who were rejected for apartments but approved for home loans, property managers say.
A screening by LeasingDesk once rejected a Dallas applicant because of two felony convictions in Kansas, even though she'd cleared a federal criminal background check for an airline job, Carner said. "She had passed the FAA check, but the apartment check denied her."
