Does Income Verification for Tenants Make Rentals More Expensive?

Does showing the proverbial cards when tenants apply to rent housing make rental housing more expensive? 

Everytime a potential tenant provides income data, the landlord is able to determine what the average income is for people applying. They can slowly increase their rent based on this data, because they know their average renter is also seeing an income increase. 

If instead the landlord had to except tenants blindly (only allowed to collected first/last months rent) they couldn't base their leasing rates on applicant income, only on what existing tenants were or were not able to afford. 

I'm sure that landlords would try to raise leasing rates higher to make up for increased vacancy, but they couldn't do that too much without pricing themselves out of the market. They might lean more on good tenant referrals that prior landlords were able to collect rent without issue, but they have no idea what the last leasing rate was, so it could've been $1 or well above market rate. 

It's been awhile since I've been a renter so I'm not sure if collecting paystub info is part of the renter application process or not. 

Would you sell a car to a stranger with 20% down and 10 payments? I sure wouldn't. Get the bank to finance it. They'll do the  income verification and credit check. 
 

 With renting, the landlord is the bank.
 

Seeing what I was approved for for my mortgage, I have no confidence in the average person to budget at all. If I was a landlord, you'd better believe I'm asking for income verification.

EDIT: and the market determines the rate. Local incomes are part of the market. It's a natural part of any functioning economy. 

Maybe, and it would definitely be a lot safer if landlords didn't see the exact amount, but could only have confirmation that it clears some threshold. From what I can find, it's still common for landlords to get exact pay info in most jurisdictions.

But setting rents based on individual tenant pay is thinking too small, until recently rents were being driven up by what basically amounts to a distributed price-fixing algorithm that takes the values of all properties in the area into account:

https://www.propublica.org/article/yieldstar-rent-increase-realpage-rent

Rents are determined by market rate, not the applicants pay stub 

I'm sorry, but two of the first 4 posts are really predictable. I'm sure you can all figure out which two.

As for the original question, why shouldn't the landlord be able to verify the applicants income to confirm their ability to reliably pay the rent? 

As mtn said, there's no way I'd rent a property without income verification, credit check, and background check. 

The laws favor the tenant, and the tenant only has their first, last, and security deposit at risk, while the landlord could be stuck in the eviction process for months or more if the tenant can't pay. That's potentially months of paying the mortgage, taxes, and insurance on a property they don't live in and isn't generating any income.

Property management companies may be trying to maximize profits, and could us income data to try to optimize rates, but I don't see the small landlord using it for that purpose. 

The average small landlord is probably more interested in reliable tenants that will be reliable with the payments and treat the property with respect. Many of the people I know that have rental properties are willing to leave some money in the table if it gets them a good tenant. 

There are some bad actors in all industries/fields, but that doesn't mean everyone it out to screw the little guy. If you want to discuss the bad actors that could be interesting, but profiling everyone in an industry based on the bad actors gets old. 

2 pages till this becomes an echo chamber?  Or three?

In reply to Mr_Asa :

It depends. How many posts are the minimum to create a chamber big enough for echos?

No Time said:

The laws favor the tenant, and the tenant only has their first, last, and security deposit at risk, while the landlord could be stuck in the eviction process for months or more if the tenant can't pay. That's potentially months of paying the mortgage, taxes, and insurance on a property they don't live in and isn't generating any income.

Not in all states they dont.

If the landlord can't pay the mortgage and taxes on a rental property, maybe they should stop getting coffee at Starbucks and cut out the avocado toast?

The big bad wolf of the business trying to screw the little guy is really tiresome, and absolutely untrue. 
 

Remember the eviction freezes during COVID?  Guess who swallowed those costs?  Landlords. With no assistance from the government.  It was an unfunded mandate forcing them to give free rent.   I know a few dozen small investors who lost their shirts on that, and ultimately had to get out of the rental business. 
 

My daughter manages about a hundred short term rentals.  Life gets pretty horrible when someone decides to become a squatter.

We also do short term rentals. Our maximum rental period is 29 days. If we rent for 30, the guests are almost impossible to evict.

Rent to someone without any income verification???  That's a terrible idea. My answer is quite succinct- go pound sand.

Sure. There are some landlords who are dicks.  But most are simple people trying to make a living and not have their properties destroyed.

There also are some tenants who are dicks. Lots of them.

In reply to Mr_Asa :

Good point, landlord/tenant rights may be different depending on the state. 

While the landlord should plan for times without tenant and ensure they can meet the financial obligations, their choice of coffee and breakfast food doesn't change the tenant's obligation to pay their rent. Avocado toast does not negate the landlord's right to take appropriate measures to ensure the person they rent to is capable of paying the rent. 

There are plenty of reasons that are not acceptable for refusing to rent to an applicant (race, gender, sexuality, etc), but I'm guessing insufficient income is not one of those. 

When I had rental property I rented to the first tenant that satisfied my requirements. Rent is based on what is available in the market, and that's pretty much it. I only used their income info to make sure they could afford the rent, and they were in fact employed.

In reply to SV reX :

Sure, all those things happened, and I've heard of (and seen up close) lots of dick tenants including those who basically do it as a career, but those facts don't banish RealPage YieldStar to the realm of fiction. The big bad wolf of the business trying to screw the little guy happens. Before the pandemic it seemed that the issue of landlords commonly trying to use flimsy excuses to keep security deposits as a matter of course was coming to a head.

We manage 8 rental properties in a vacation area. Occupancy rates the last few years were nearly 100% for the entire peak season.  This year?  Between 50-70%.  No particular reason... probably just that people have tightened their belts because of inflation (and a few too many people have converted houses into the rental market).

30% reduction in occupancy rate equals about $2700 less income per month.  That's a budget shortfall of $18,900 per year.  50% reduction is a shortfall of about $31,500. Every one of these owners is a small time operator (with only 1 rental property).

Im sure they would love the suggestion to just drink fewer Starbucks, or to rent to people who are not properly qualified or verified.

Seriously??  Geez.

In reply to pheller :

The short answer to your question is No. Income verification has nothing to do with rental rates. 
 

I've had rental property for almost 40 years, known many landlords, and worked for 100's of owners. I seriously doubt any of them have ever used income verifications to jack rents. 
 

Rents are based on the local market conditions and comps.  Income verifications are to show a tenant has a job, and has sufficient income to pay the rent.  That's all. 

We always did a credit check. Biden’s no rent payments during covid soured us on our rental. 9 months of no revenue but still needing to pay the mortgage was our limit.  She left the place in a mess as well. 

It's a huge conspiracy to keep you broke, you figured it out. Congratulations. 

In reply to Steve_Jones :

Look, you and I just discussed this at the Bohemian Grove last week. Quit letting out the secrets, there will be consequences.

No Time said:

In reply to Mr_Asa :

Good point, landlord/tenant rights may be different depending on the state. 

While the landlord should plan for times without tenant and ensure they can meet the financial obligations, their choice of coffee and breakfast food doesn't change the tenant's obligation to pay their rent. Avocado toast does not negate the landlord's right to take appropriate measures to ensure the person they rent to is capable of paying the rent. 

There are plenty of reasons that are not acceptable for refusing to rent to an applicant (race, gender, sexuality, etc), but I'm guessing insufficient income is not one of those. 

Well, that joke obviously didn't land.

Your premise is flawed.  If a landlord is relying solely on the tenant to pay the bills for a place, they don't need that place.  If a lamdlord requires a tenant to pay the bills, they are living paycheck to paycheck based on someone else's money. How is that fiscally responsible?

If you decide to subsidize your business model with govt programs, you kinda know what to expect.  If you go into a business where you're being subsidized by a random renter... well, you get what you get.

In reply to Mr_Asa :

That's not true. All businesses depend on their customers actually paying for the goods and services they provide. 
 

The only difference between landlords and other businesses is that they have fewer customers. It hurts more for the landlord when their customers don't pay for services than for a business with more customers. 
 

And if it happens too often (like with the COVID relief), then prices go UP for tenants significantly because the property gets sold and expenses go up (and therefore rents).

SV reX said:

In reply to Mr_Asa :

That's not true. All businesses depend on their customers actually paying for the goods and services they provide. 

And when a business has no revenue stream they just stay open?

In reply to Mr_Asa :

Nope. They close. 
 

When that happens to a landlord, rents go up.  
 

I have a friend who owned 6 rental houses before COVID. She had owned them for many years.  Bought them at a good price, had low financing rates.  Therefore her rents were very fair.  When the government forced her to offer her services for 9 months without pay, she was forced to sell at a loss.  The new owners bought at a higher price with higher mortgage costs.  Rents nearly doubled.

Not paying rent is theft. Plain and simple.

In reply to Mr_Asa :

If the lack of income goes on long enough, they go bankrupt. Well run businesses keep retaining earnings to cover shortfalls, repairs, maintenance, upgrades, and other expenses. 

The biggest joke in the get rich quick real estate schemes is the renter pays the mortgage. No. The landlord pays the mortgage, taxes, insurance etc. The renter might pay the rent or they might be evicted.

To add to the echo, rents are set through market analysis of comparable properties. 

SV reX said:

In reply to Mr_Asa :

Nope. They close. 
 

When that happens to a landlord, rents go up.  
 

I have a friend who owned 6 rental houses before COVID. She had owned them for many years.  Bought them at a good price, had low financing rates.  Therefore her rents were very fair.  When the government forced her to offer her services for 9 months without pay, she was forced to sell at a loss.  The new owners bought at a higher price with higher mortgage costs.  Rents nearly doubled.

Not paying rent is theft. Plain and simple.

My friend, this is an anecdote. 

It sucks that it happened to your friend, but it doesn't prove that rents go up when people sell.

It does kinda prove my point though.

In reply to Mr_Asa :

No, your premise is flawed.

I was going to put in my 2 cents, but seeing how this is going already, berk it.

In reply to Mr_Asa :

Yes it's an anecdote.  It's also a fact. 
 

What you are suggesting is completely absurd and untrue.