Property Rights

Seattle Bans Landlords From Screening "Qualified" Tenants

The city's goal is to curb "unconscious bias." But the policy is based on dangerous premises, and is likely to harm tenants more than it benefits them.

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Seattle, Washington.

The Pacific Legal Foundation, a pro-property rights public interest law firm, recently filed a lawsuit challenging a Seattle law that forbids landlords from picking and choosing among potential tenants. The purpose of the new regulation is to combat implicit or subconscious bias by landlords:

Seattle is apparently breaking new ground by requiring landlords in the city to rent their housing units to qualified applicants on a first-come, first-served basis….

The goal is to ensure prospective renters are treated equally, according to Councilmember Lisa Herbold, who championed the policy. When landlords pick one renter among multiple qualified applicants, their own biases — conscious or unconscious — may come into play, she says….

Proponents of the policy hope it will reduce discrimination.

Ann LoGerfo, a directing attorney with Columbia Legal Services who pushed for the policy, offered an example: A landlord with two qualified applicants picks a name he associates with his own ethnicity, rather than a name that sounds foreign to him.

Deliberate discrimination on the basis of race, sex, ethnicity, religion, and related classifications is already forbidden by state and federal laws, such as the Fair Housing Act of 1968. But the Seattle law, in an attempt to combat subconscious discrimination, would eliminate landlords' ability to choose among potential tenants to a vastly greater extent. If an applicant meets minimal criteria, he or she must be accepted on a first-come, first-served basis, even if there are other applicants who have much better qualifications.

It is surely true that landlords sometimes engage in subconscious discrimination. Indeed, the same is true of a wide range of people engaging in all kinds of transactions. It does not follow, however, that eliminating landlord choice is the right answer. Doing so is likely to harm tenants more than it benefits them. If landlords cannot rank potential tenants based on factors such as reliability, credit history, their treatment of previous rental properties, and so on, the predictable result is that they will either put fewer properties on the market to begin with, charge higher rent, increase security deposits, or some combination of these and other measures that make rental housing more costly. This likely to be particularly true of landlords who own properties in poor and minority neighborhoods, where landlords believe the risk of nonpayment or other problems is likely to be unusually high.

Obviously, landlords' decisions about potential tenants are sometimes misguided, both because of unconscious bias and for other reasons. But if there is a substantial population of tenants whose reliability current landlords are underestimating, that's a potentially valuable profit opportunity for wiser landlords or new entrants into the housing market. Cities can strengthen such beneficial competition (and otherwise make housing more easily available to the poor and lower middle class) by reducing zoning restrictions that make it difficult to build new homes and massively inflate the cost of housing in many cities. Seattle itself is one of the best examples of this phenomenon. If the city wants to increase housing opportunities for minorities and the poor, it should cut back on zoning rather than adopt regulations that are likely to make rents even higher than is already the case.

The Seattle law illustrates an important downside of trying to use government regulation to offset the subconscious cognitive biases of the private sector: there is little, if any reason to believe that voters and politicians are less biased than the people whose behavior they are trying to regulate. Much of the time, they are likely to be more so. Because the chance that any one vote will make a difference in an election is extremely small, voters have very little incentive to combat their biases, and often instead act as "political fans" who evaluate information in highly prejudiced ways. Politicians are not much better. In the case of Seattle, political leaders, likely influenced by ideological bias, have adopted a policy that is likely to harm the very people it is supposed to help.

By contrast, landlords and other market participants are likely to lose money if they let their decisions be influenced by irrational bias. That does not mean they will always avoid such influence; far from it. But their incentives to do so are much stronger than those of politicians and voters. Relying on the political process to cure cognitive biases will often lead to more biased decision-making rather than less.

At this point, it is difficult to say whether the PLF lawsuit against the Seattle policy will succeed or not. Their landlord clients' main claim is that the new law is a "taking" of landlords' property that requires compensation. Such a claim would likely fail under the Takings Clause of the Fifth Amendment. Current Supreme Court precedent (which, in my view, is misguided) makes it very difficult for property owners to prove that a regulation counts as a taking unless it has destroyed virtually all of the property's economic value. However, the case against Seattle is being litigated under the Washington state constitution, which state courts have interpreted as giving stronger protection for property owners. The motion for summary judgment drafted by PLF discusses the relevant precedent.

Whether or not Seattle's policy is illegal, it potentially sets a dangerous precedent. If the state can impose severe restrictions on liberty and property rights in order to curb subconscious bias, there would be few meaningful limits to its power. Very few if any types of decisions are completely free of cognitive errors of this type. They can occur in almost any economic or social transaction.

UPDATE: In the original version of this post, I should have noted that the Seattle law does allow landlords to set initial minimal criteria for potential tenants seeking to rent a given property. But once the criteria are set, the landlord must take all "qualified" tenants on a first-come, first-served basis. I have revised the post to make this clear, and also altered the title to that effect.

UPDATE #2: In principle, landlords could eliminate most questionable tenants by setting the initial minimal qualifications very high (e.g. - requiring a perfect credit rating or the like). But aside from risking leaving apartments empty, this would tend to screen out a disproportionate number of poor and minority renters - precisely the population that the Seattle law is supposed to help.