Angelita White and her husband got an unexpected surprise when searching for a new apartment.
The high school teacher and real estate agent racked up more than $200 in tenant screening fees, which they had to pay each time they applied to rent a unit.
“Every place we went, we would have to do a credit check of like $25 to $40, and you had to turn in everything before they would even show you the apartment,” said White, 40, of Newport Beach. “And then every place that you would try to look at would use a different credit company or a different type of online portal. And if I tried to give them my own credit report, … they would say no, we only accept it through this portal.”
With vacancies at a two-decade low, rental shoppers often must apply again and again before they can find a new place to live.
And each time they apply, they typically pay fees ranging from $25 to $55 per adult for credit checks and employment and criminal background verification. Because each landlord uses their own screening service, tenants often must make repeated payments with each application — sometimes even when using the same portal over and over.
That’s on top of the already high cost of renting a new unit, which includes the first month’s rent, a security deposit and moving expenses. And it’s on top of galloping rent hikes that saw lease rates jump 14% year over year in Los Angeles County, 16% in the Inland Empire and 18% in Orange County, according to RealPage.
A bill now pending before the California Legislature seeks to reign in those costs by allowing tenants to purchase a reusable tenant screening report from a consumer reporting agency and submit it to multiple landlords.
Assembly Bill 2559 already has cleared the Assembly and is awaiting a vote in the state Senate. The goal, said bill author Christopher Ward, D-San Diego, is to reduce costs for people “that unfortunately have to apply to multiple places given the limited vacancies that we have.”
To ensure the reports are timely and free from tampering, they would be good for just 30 days and could be accessed from “a third-party” tenant screening provider. The reports would include a credit check, employment verification and a seven-year eviction history.
“The competition (for rentals) is fierce. Sometimes there can be 30 or more applicants for one unit,” Ward said. “You have to go around and apply to 10 or 12 units to try to get lucky in and be able to secure the right to lease that unit. And that means you have to pay $40 or $50 times 10 or 12 applications or more. So, it really does add up to hundreds of dollars.”
Standard practice
Tenant screenings are standard practice among landlords since they’re keenly interested in protecting their assets and ensuring that the rent gets paid, industry officials say.
“In California, it could be a $1 million property that they’re renting out, and they’re giving it to a complete stranger,” said Alexandra Alvarado, marketing director for Calabasas-based American Apartment Owners Association and its sister company, TenantAlert. “It’s not easy for a landlord to just give that to somebody that they don’t know. They want to make sure there’s something there that can make them feel a little better about the decision.”
It’s rare to find landlords who don’t do background checks unless they’re renting to a relative, Alvarado said
“If anything, they’re just upping it more,” she said. “They want more data.”
Landlords often bill the tenant through a provider’s online portal instead of collecting the fees themselves. And landlords often won’t consider an application unless tenants first log in and give their providers a credit card number.
For White and her husband, who are both real estate agents, it was hard to shell out that cash because of the uncertainty of getting the rental they applied for.
“And no one would respond to you once you filled out the whole app and paid the fee,” White said. “We did get that feeling, like, oh, is this a scam?”
It cost John Baxter and his partner, Jorge Herrera, $160 to apply to two apartments when moving last month to Long Beach from Costa Mesa.
They paid $30 each for the first credit check and $50 apiece for the second one.
“It had to be cash or money order. It couldn’t be a card,” Baxter said of his two background checks. “They’re quick enough to take your money and say we need to start processing you right away because there’s a lot of people applying for this apartment. And then, once you pay, you don’t hear from them.”
Andrew Hornyak, 26, of Los Angeles said he and three roommates paid more than $1,000 in application fees — or $50 apiece for each application – during a futile search last summer and fall for a house or large apartment.
“I felt we already paid for the (background check). The info was already there,” said Hornyak, a television industry worker. “I felt like this is an extra thing they can ask for. Because it’s so competitive, we can’t say no.”
Top stressor
Twenty-six percent of U.S. renters who moved in the past two years listed multiple application fees as the top stressor of a rental search, according to a recent Zillow survey conducted by The Harris Poll.
The typical renter submitted two applications during their search, and 68% paid an application fee, according to Zillow’s Consumer Housing Trends Report, a separate analysis released last month. Typical fees nationwide ranged from $40 to $59 per check.
Industry officials resist the creation of state and local laws regulating screening fees, saying the creation of a universal, reusable data search can be complicated.
One reason is landlord preferences vary, said Eric Ellman, senior vice president for public policy and legal affairs for the Consumer Data Industry Association, which serves background check providers.
Some landlords only want a credit check, while others are willing to order more expensive searches that include employment verification, eviction, criminal and bankruptcy records as well as sex offender screening.
“You’re oftentimes paying for a different service,” Ellman said. “Landlords are not always necessarily ordering the same product.”
Industry officials also worry about getting doctored reports from tenants.
“If you’re talking about this as a paper document, well there’s a lot of fraud out there,” said Terry Clemans, executive director of the National Consumer Reporting Association.
Clemans also worries that a reusable screening report could run afoul of the Fair Credit Reporting Act, which among other things, requires that everyone who sees the report has a “permissible” right to see it.
“Like so many things, it gets complex,” Clemans said. “(It sounds like) a consumer-friendly concept that makes sense at face value. But then when you dig into the logistics of it and realize that there’s a federal law, that actually makes it very challenging.”
Yet, reusable screening reports do exist. Zillow, for example, allows renters to use one $29 fee to cover all their background checks — including credit checks and records on a tenant’s eviction and criminal history — for applications to rentals listed on its site.
Pasadena resident Sean Pike applied to about a dozen apartments when he and his girlfriend needed to move for his new job at UC San Diego. But he saved a bundle because half of the units he applied to were through the Zillow site. It still cost the couple $400 in application fees for the six units he applied to directly.
“In our experience, places are going very fast. There are many, many people applying, and so just to get our foot in the door, we thought we had to put in an application to be considered,” said Pike, 29, who just earned his doctorate in astrophysics. “I think it’s interesting that we’re paying these fees to big companies multiple times when there’s no reason they couldn’t do something like Zillow, where you pay them once, you do one application and kind of share it.”
Revenue up
As rentals get scarcer, it’s logical to assume tenant applications – and tenant background checks — would be on the rise. Yet, there is no data to confirm whether that trend is occurring, industry officials said.
Industry research firm IBISWorld.com reported in June that revenue for both employment and tenant screenings totaled nearly $4 billion in the latest year, up $591 million, or 17%, in the past five years. It’s unclear, however, how much of that revenue is for tenant screenings and how much is due to rising employment.
Assemblymember Ward said his bill is patterned after reusable tenant screening laws already in effect in Washington and Maryland.
New York state capped credit and background check fees at $20 and allows tenants to avoid those fees by providing a current version of their own background check.
If AB 2559 gets signed into law, accepting a reusable report would be voluntary – a concession made after the California Apartment Association objected to its original wording. But no screening fee could be charged if the landlord accepts a reusable report.
How widely accepted will reusable reports be under a voluntary system?
“We will see,” said Ward. “We know that they are being utilized in the states of Washington and in Maryland.”
Current California law caps application fees and background checks at $55.58 per application, an amount that rises annually based on inflation.
In addition, the fee can’t exceed the landlord’s costs for screening an applicant, and landlords must refund any unused portion of the fee. Tenants are entitled to a receipt itemizing a landlord’s screening expenses. The landlord also must provide a copy of the credit report if requested. In addition, the law specifically forbids landlords without a vacant rental from charging application fees.
Some tenants expressed concern that property managers may be pocketing fees without actually running background checks because so many tenants are applying.
San Dimas renter Amanda Valles, 32, an estimator for a commercial heating and air conditioning provider, said she was one of at least 20 tenants submitting applications for one apartment last year. But she never heard back from the manager.
“You couldn’t submit your application without the fee, and it had to be a check or money order,” said Valles, who eventually gave up her search and didn’t move. “I don’t even know whether they even ran my background. I wish there was a way to know that.”
Source: Orange County Register
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