Consumer Protection Challenges

A variety of consumer protection challenges have emerged in the housing marketplace.

Predatory housing practices: Older adults are sometimes the targets of abusive tactics. These can include:

• Unfair rent-to-own arrangements in which a tenant pays rent for a substandard property in need of extensive repairs but is then on the hook for all the repairs.
• Unregulated housing wholesalers who put pressure on older homeowners and others to sell their homes well below market value.
• Exclusive listing arrangements that require any owner of a particular home to use a specific real estate agent for decades. Under these agreements, it is impossible to transfer the title of a home without using the designated real estate agent. They typically last 40 years.

Institutional investors: Private equity firms and other institutional investors, such as limited liability companies (LLCs), limited liability partnerships (LLPs), and real estate investment trusts, have negatively affected the housing market. Following the housing market crisis in 2008, institutional investors began investing in the single-family housing market, driving up the cost of housing. They have also invested in large apartment buildings, owning at least one million apartments in 2021. After buying an apartment building, they often seek to quickly lower costs, increase rents, or both. They then typically resell the building at a higher price. Institutional investors are also more likely to raise rents; decrease or eliminate maintenance, upkeep, and amenities; and evict tenants.

Tenant-screening reports and scores: Property owners typically use tenant-screening reports to decide whether to rent to a prospective tenant. Tenant-screening reports typically contain a credit report, a criminal background check, and rental history information. However, the Consumer Financial Protection Bureau has found that only 1-2 percent of these reports include rental payment history (see also Credit Reports and Scores). Tenant-screening companies commonly offer a “score” with the report, which provides a recommendation on whether to rent to the tenant.

One challenge of tenant-screening reports and scores is a lack of transparency. They are even more opaque than the credit-scoring business and receive even less oversight. This is especially a concern because federal regulators are not charged with ensuring that tenant-screening scores are predictive or statistically sound.

A second challenge is that tenant-screening reports frequently contain errors. This includes errors common in credit history, one component of tenant-screening reports. Tenant-screening reports can also include the wrong person’s eviction or criminal record, eviction records resolved in the tenant’s favor, and other inaccuracies.

The use of tenant-screening reports and scores amplifies and perpetuates racial and ethnic disparities in access to affordable and appropriate housing. Tenant-screening companies and others often assert that relying on tools driven by artificial intelligence helps eliminate bias. Research indicates that these tools instead worsen discrimination in housing. This is due to disparities in the data used to train the artificial intelligence models (see also Artificial Intelligence).