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 have negatively impacted the housing market. Following the housing market crisis in 2008, private equity firms began investing in the single-family housing market. By 2021, they had bought nearly one-quarter of single-family homes sold in the U.S. Today, they most commonly buy homes in low- and moderate-income neighborhoods. In doing so, they frequently outbid families seeking to buy a home to live in. This has especially affected prospective Black and Hispanic/Latino buyers in suburban neighborhoods. 

Private equity firms have also begun buying large apartment buildings. In 2021, private equity firms owned at least one million apartments. After buying an apartment building, they seek to quickly lower costs, increase rents, or both. They then resell the building at a higher price. Private equity firms are also more likely to raise rents; decrease or eliminate maintenance, upkeep, and amenities; and evict tenants. 

Tenant screening reports and scores: Proprietors typically use tenant screening reports in order 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 (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. 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 these automated decision-making tools (which may involve 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 Algorithmic Accountability).