Banning Criminal Background Checks Will Lead To More Housing Discrimination, Not Less

“top-down reforms like the one proposed by Pressley and Tlaib would shift more of the risk of housing ex-cons onto landlords. The result is both unjust and counterproductive.
Remember the Obama-era initiative to “ban the box”? Reformers sought to boost the job prospects of persons with criminal records by prohibiting employers from asking about applicants’ criminal histories. It was another well-meaning idea, but one that overlooked unintended consequences. Preventing employers from discriminating based on criminal history didn’t remove the desire of some employers to avoid hiring criminals; it just forced them to use poor information. More employers began discriminating against black and Hispanic applicants. Evidence suggests a similar outcome if criminal background checks of tenants are restricted. A study published by the Federal Reserve Bank of Minneapolis found that when the use of background checks and other information was restricted in that city, racial discrimination in housing increased relative to nearby St. Paul, where no such restrictions were in place.”

Mortgage rates are at a 21-year high. Here’s what that means for you.

“According to Freddie Mac, the rate for a 30-year fixed-rate mortgage has climbed to 7.09 percent, an uptick from the 5.13 percent it was at a year prior.
A mortgage rate is “the interest rate charged for a home loan,” and effectively the monthly cost of borrowing that money. As mortgage rates have gone up, monthly payments have gotten more and more pricey for people looking to purchase a home even if the base price of the house stays the same.

For example, under a 3.22 percent 30-year fixed mortgage rate in January 2022, the monthly payment on a $400,000 house in New York with a 20 percent down payment was $1,716, per a Bankrate calculator. Now, under a 7.09 percent mortgage rate in August 2023, the monthly payment on the same house with the same price would be $2,477.

Such costs have had an impact on the housing market: As mortgage rates have increased, some potential buyers have held off on purchasing houses, while sellers have similarly been less likely to list their property. For current homeowners, there’s a major incentive to wait until rates go down before deciding to re-enter the market and search for their next house.

“These higher mortgage costs are a tremendous barrier to entry for anyone wanting to enter the housing market,” Gregory Daco, the chief economist for Ernst & Young, tells Vox.”

“One of the biggest factors in the rise in mortgage rates is the Fed’s approach to monetary policy, which includes interest rate hikes aimed at combating inflation.”

Declaring a ‘Right’ to Housing Won’t Solve Homelessness

“If a property owner can’t properly vet tenants and potentially can’t evict them, then they aren’t going to invest in or rent out apartments. They certainly aren’t going to make repairs to houses lived in by non-paying tenants, which will make the housing stock less adequate. We need more housing, not less, and such edicts discourage housing investment.”

Study: Banning Investors From Buying Homes Leads to Higher Rents, More Gentrification

“They found that banning investors from buying and converting housing to rentals worked in one sense: The share of investor-owned rental properties in affected neighborhoods fell, and the number of properties bought by first-time homebuyers increased.
On the other hand, however, these new homeowners tended to be richer than the renters they were replacing, and the costs of rental housing increased overall.

“The ban has successfully increased middle-income households’ access to homeownership, at the expense of buy-to-let investors. However, the policy also drove up rents in affected neighborhoods, thereby damaging housing affordability for individuals reliant on private rental housing, undermining some of the intentions of the law,” write researchers in the study published on SSRN.”

Will limiting background checks make housing fairer?

“Every year, more than 600,000 people leave US state and federal prisons. Then they need to find a place to live.
Researchers have found that formerly incarcerated individuals are far more likely to be homeless than the general public. Many landlords simply reject renting to applicants who’ve been to jail or prison — and given that one in three US adults has a criminal record, this creates a significant housing crisis.

But those released with stable housing are more likely to reintegrate into their communities and less likely to end up back in prison than their formerly incarcerated peers in more precarious housing situations.

Enter “fair chance” laws: legislation that limits how landlords can use criminal records when screening prospective tenants. While the ordinances vary from place to place — some cover all rental housing while others just apply to subsidized housing — the goal is to limit how criminal histories can be used and ensure due process for prospective tenants when applying.”

“For now, the only rigorous study on fair chance housing ordinances comes from a working paper series at the Minneapolis Federal Reserve, where two economists looked at the effects of a law the Minneapolis city council passed in 2019.

The local law caps security deposits at one month’s rent, bans the use of credit scores in rental applications, and restricts landlords’ ability to reject people based on evictions that occurred more than three years prior. For criminal records, landlords can no longer reject applicants due to misdemeanors older than three years, felonies older than seven years, and certain more serious convictions older than 10 years.

The economists submitted fake email inquiries to publicly listed rental ads using names chosen to sound like Black, white, and Somali people. (Minnesota has the largest Somali population in the US.)

The researchers found that after Minneapolis’s fair chance ordinance took effect, discrimination against Black and Somali applicants increased by over 10 percentage points for both groups, relative to those in neighboring St. Paul, which did not have such a law. Differences were largest for emails sent from Black and Somali male-sounding names, for apartments that were at least two bedrooms, and for units in historically Black neighborhoods. (The researchers couldn’t identify individual companies that discriminated, but could observe discrimination based on overall contact rates to randomized emails sent to large groups of properties.)”

“it’s impossible to tell which aspect of the law — be it limiting eviction history, credit history, or criminal records — might be causing the effect.”

“In 2021, New Jersey passed a statewide fair chance housing law with bipartisan support, and with backing from landlord groups. It doesn’t go as far as Seattle’s ordinance in restricting how criminal histories can ultimately be used, but it comes with a strong enforcement mechanism.”

” With the exception of convictions related to producing methamphetamine and being listed on a sex offender registry, landlords can never ask about an applicant’s criminal history in the first round of applications, and they can only evaluate a criminal record after a conditional housing offer has been made. If a landlord finds a serious crime committed relatively recently, they can withdraw the offer, explaining to the applicant in detail why, and the applicant has the right to appeal it or file a complaint with the state. A housing provider can never rely on arrests that didn’t result in convictions to reject an applicant.”

Economists Are Right To Hate Rent Control

“in St. Paul, Minnesota. In 2021, city voters passed a ballot initiative that imposed a 3 percent annual cap on rent increases without exemptions for new construction or allowances for inflation.
The result? Developers fled town en masse, walking away from already in-progress projects and canceling permit applications. The city hurriedly worked to weaken the voter-passed law.”

California Regulations Prevent Insurers From Accurately Pricing Wildfire Risk, so Now They’re Fleeing the State

“Like a good neighbor, State Farm Insurance is warning Californians to stop living and building in high wildfire-risk zones. That is the upshot of a press release in which the insurer states that the company, as a “provider of homeowners insurance in California, will cease accepting new applications including all business and personal lines property and casualty insurance, effective May 27, 2023.” State Farm is taking this step largely because the California Department of Insurance’s system of price controls does not allow it and other insurance companies to charge premiums commensurate with the potential losses they face.

Consequently, State Farm is no longer willing to sell new homeowner insurance policies because the company calculates that it cannot cover potential losses in the face of increasing wildfire risks, fast-rising rebuilding costs, and steep increases in reinsurance rates. Higher rebuilding costs boost the values of the houses and businesses that companies currently insure.”

In State Legislatures, Targeted Bills and Bipartisan Support Were Key To Passing Housing Reforms

“Legislatures in three states—Washington, Montana, and Vermont—passed bills legalizing at least duplexes on almost all residential land. That makes six states that have now eliminated single-family-only zoning.
Washington and Montana also passed a long list of complementary reforms, including bills in both states that streamline housing approvals and let homeowners add accessory dwelling units (ADUs) to their properties.

On the other hand, ambitious omnibus bills that tried to squeeze through most of the YIMBY agenda in one fell swoop failed in Colorado, Arizona, and, most dramatically, New York.

The mixed results are the product of a maturing YIMBY movement that’s willing to take more risks and which has a higher threshold for success, says Salim Furth, a senior research fellow at George Mason University’s Mercatus Center.

“The Overton window really moved on what states can do and our standards were higher for what constitutes a win,” he tells Reason. “We’re looking for bills that would obviously, immediately release a lot of construction activity.””

Texas Bill Would Legalize Townhouses

“Texas has a well-earned reputation as a place that builds.
The state built 16 percent of the country’s new housing last year despite being home to 8 percent of its population, according to data from the National Association of Home Builders. The Lone Star State managed to build over twice as much housing as the more populous, more expensive California.

Two decades of robust population growth and COVID-era price hikes have nevertheless pushed up Texas home prices and rents. The Legislature is considering a series of reforms intended to keep housing costs down and the growth machine running.

This past week, the Texas Senate approved a bill that allows homes to be built on smaller lots. In the past month, it’s also passed bills that legalize accessory dwelling units (ADUs) statewide and allow private parties to issue building permits.

“The goal is to get government out of the way and allow the private sector to increase the supply of housing so that we can meet demand and bring down the cost,” says James Quintero of the Texas Public Policy Foundation, a free market think tank.

Local minimum lot size rules can require homes to sit on lots of 5,000 square feet, 10,000 square feet, a whole acre, or even more. Satisfying these requirements means builders have to consume more land than they otherwise would. They end up building larger, more expensive homes to compensate for those higher land costs.

“The larger the lot size, the larger the price tag,” says Quintero.

There’s a growing body of evidence that Texas builders would make use of smaller lots if they were allowed.

One 2019 study of minimum lot sizes in several Texas suburbs found that typical lot sizes are concentrated at the legal minimum size. Builders also make frequent use of flexible “planned unit developments” to build housing on lots smaller than the legal minimum.

In famously unzoned Houston, several rounds of reform beginning in the late 1990s shrank minimum lot sizes to just 1,400 square feet. The result was a building boom that produced 80,000 new homes in the already growth-friendly city, according to a recent study published by George Mason University’s Mercatus Center.”