Imagine a stranger in a coffee shop tapping you on the shoulder and asking to borrow your car for an emergency. After some conversation, the person seems to be truly in trouble and even trustworthy. Would you ask to see his identification? Maybe you’d ask his name and do a Google
GOOG
search and even get his address and phone number. It’s an unlikely scenario, but the point is that almost everyone would agree that the more information about the person you could get the better. However, when it comes to rental housing, screening potential residents has increasingly fallen into the category of being an “injustice” or “unfair.” And it is costly too to apply for housing; most housing providers charge for screening. Is there a solution that could avoid what’s already been unfolding in the United States, legislative bans on screening potential residents?

Already, Minneapolis has limited the use of credit checks as part of applying for rental housing, Washington state has limited the use of criminal background checks, and there are moves underway now to make previous eviction records of prospective tenants invisible to housing providers.

One argument is that screening mechanisms can return false positives for everything from theft and other crimes to bankruptcies and other financial problems. One screening firm was sued for multiple failures that caused potential residents to lose a housing opportunity. While this is a problem, it doesn’t seem widespread and isn’t an indictment of the necessity of screening people when they are asking to use someone else’s private property. The point would be to ensure that screenings are done correctly and to have ways of correcting problems when they occur, not banning screening.

The second and more serious threat to screening tenants is the charge that it is inherently racist; housing providers don’t want certain people living in their properties so they use screening to filter those people out, especially people of color. There have been claims made that this is quantitatively true, but like most things about race and housing, it isn’t about race but about poverty. Poverty is disproportionately found in communities of color; that is a fact. So, when it comes to issues with hits on a screening report, it shouldn’t be a surprise that often the applicant is a person of color. But some advocates make the leap that it isn’t the problems in the screening report but the person’s race that results in a rejection.

Back to my analogy in the first paragraph. Screening is an essential part of any business based on lending or renting property to unknown people. Risk is something that is often monetized in an economy, and the rental business is all about taking a risk on strangers. To offset that risk, screening helps establish a basis to mitigate risk. There is no doubt in my mind that there ends up being some racial disparities in this process, but that, like the false positive problem, is not because screening is bad but because of the problem of disproportionate poverty among people of color.

The answer to these problems isn’t to ban credit checks but to help people improve their credit scores through financial education and offering free credit repair. Part of this could include funding risk mitigation funds that could be used to back residents who have poor credit or pervious evictions on their records. This kind of approach would actually help people not just find an apartment or house, but it could help people improve their overall financial history and expand their opportunities in other ways. The same is true for criminal backgrounds. An example of a great program is the Earned Release Voucher in Washington state, a program that covers housing costs when a person exits the system. Other transition programs together with the voucher means a person has a real chance at success.

Another bright spot in all this concern about screenings is a company called RentSpree, a company started 6 years ago with the idea of consolidating the process of applying for rental housing, including creating one reusable screening application and one fee. RentSpree also offers a range of services to allow a single point of entry for residents and an easy way to handle applications for housing providers. RentSpree claims over one million users and sees its customers are mostly smaller housing providers that don’t use management companies.

Michael Lucarelli, the CEO and founder of the company was a renter and found himself trying to find a new apartment in a competitive economy; at one point a housing provider wanted him to fax his information for a screening. Lucarelli saw not just the absurdity of many of the outdated methods being used by housing providers to screen prospective residents but also the costs.

Read Related Also: Cyber Innovation Waits For No Market

Lucarelli said he founded RentSpree because “the process for renting and securing housing, as it is, does not serve any party involved as best as it could.” Did Lucarelli demand banning all screening? No, he saw an opportunity for a new business in making things better for both prospective residents and housing providers.

“We help supply these owners and agents with the tools they need to effectively work with tenants who are looking to rent their properties. In the same vein, we also make the process simple and effective for renters by simplifying tasks like applying to multiple properties, paying rent, and more.”

A big advantage of RentSpree is avoiding paying multiple screening fees, money that can add up if the rental market is really competitive.

One housing provider I spoke to expressed concern about legislation passed in California, Assembly Bill 2559, that codifies a definition of “reusable tenant screening report.” How long, she wonders, before state and local government begins mandating when, how, and who does screening.

“I’m really good at screening my applicants with the info I know I’m getting,” she said. “And I don’t want to change it . . . If you can limit the screening, it’s not hard to limit what criteria go on it.”

It’s a good point. A few years ago an ambitious City Councilmember and tech start up CEO decided to impose rental deposit insurance on every housing provider and applicant for housing in the city of Cincinnati; there were many problems with the model and roll out.

In contrast, Lucarelli seems pragmatic. Government agencies trying to implement a mandate might be well meaning, but “they might not be as close to the population and the variety of people the process touches. So, they may get it wrong.” Lucarelli says that “at the core of RentSpree’s development is the experience of renters, agents and owners alike, and the challenges they face.”

And that’s the point. Forcing a solution on everyone in the real estate market isn’t a solution at all. RentSpree is an example of spontaneous order, people coming up with solutions that are mutually beneficial and, yes, profitable. Lucarelli’s company is right at the heart of what could be called a “market-based solution,” a product that makes money for investors while saving money and time for consumers; applicants save money on applications, housing providers save time on screening, and investors see a return on their investment.