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

The best reforms would correct the real problems of overcriminalization and overincarceration, as well as removing all artificial barriers to building more homes.

America needs more housing. Pressure for reform is only growing as available homes get less and less affordable. Unfortunately, rather than addressing the root cause of high housing prices—an epidemic of local overregulation that prevents enough homes from being built—some legislators continue to flirt with social experiments that can harm both landlords and renters.

For example, some states and localities have implemented well-meaning "fair chance" laws banning criminal history on background checks for prospective tenants. Progressive Reps. Ayanna Pressley (D–Mass.) and Rashida Tlaib (D–Mich.) recently introduced the idea as federal legislation. In a statement, Pressley said, "It's time we remove the systemic obstacles that have exacerbated the prison-to-homelessness pipeline."

We do indeed have an overcriminalization and overincarceration problem in this country, so on its face, this seems like a good idea. According to the Department of Justice, more than 650,0000 ex-offenders are released from prison every year, not counting the nearly 6.9 million people on probation, on parole, or still in jail or prison at any one time. Far too many face undeserved challenges when trying to re-acclimate into society and not reoffend.

That's partly because relatively few landlords want to rent to people with criminal records. Landlords minimize the risk of delinquent or destructive tenants by selecting the best applicants on a given margin. From this perspective, avoiding people with criminal records seems like an easy choice, even though it means some potentially great tenants are rejected. The best reforms would correct the real problems of overcriminalization and overincarceration. That's politically difficult and may take a long time. Equally important would be removing all artificial barriers to building more homes.

An abundance of homes, especially rental properties, would reduce prices and encourage landlords to compete along different margins, including accepting the previously incarcerated. More housing supply would also make it easier for ex-cons with stable jobs to buy homes at much lower prices and be free from landlords altogether.

On the other hand, 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.

It's not that individuals with past convictions never see their applications accepted. It's that banning landlords from acquiring background information that they find useful won't suddenly change their thought processes about what makes for desirable tenants. These landlords will find other, noisier information to use in its place—information that may unfortunately sometimes draw from racial stereotypes.

Oh, and because noisier information means more mistakes, it will also further reduce the housing supply by discouraging people from becoming landlords.

Nevertheless, the effort is gaining steam. The Federal Trade Commission and Consumer Financial Protection Bureau recently sought public comment on the use of criminal and eviction records in screening clients. Although they have proposed no specific action, it's easy to guess which direction the Biden administration is leaning.

Increased racial discrimination is not the only possible unintended consequence. As one comment from the public observed, "Rental housing providers are in the business of housing and not the eviction business." Eviction is a last resort, but making it harder for landlords to match with the right tenant is likely to mean more of it.

There are many different types of landlords, and they should be able to judge for themselves what information is necessary to operate at their desired risk tolerances. Efficiency keeps customer costs down, and it's a rare market where efficiency improves with less information.

The formerly incarcerated certainly do need more access to housing. But the best available means is simply to increase the supply of housing while reducing the number of people imprisoned for minor offenses.

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