Private equity landlords' screening process discriminated against renters, lawsuits contend

Two large private-equity-backed landlords discriminated against prospective tenants by relying on screening systems reporting inaccurate information about applicants’ previous evictions and criminal histories, according to two lawsuits filed Wednesday by an Indianapolis housing nonprofit group. The lawsuits follow complaints by tenants and their advocates about the impact some private-equity-backed landlords have had on residents, including junk fees, reduced property maintenance and frequent evictions. 

The new litigation centers on Tricon Residential, a California-based landlord recently acquired by the Blackstone Group of New York City, one of the country’s more prestigious private equity firms, and Progress Residential, a landlord owned by Pretium Partners, which is overseen by Don Mullen, a former Goldman Sachs executive. The suits were brought by the Fair Housing Center of Central Indiana, an advocacy group serving residents of 24 counties in the state. Both Tricon and Progress denied tenant applications based on inaccurate information generated by a third-party screening service, the lawsuits say, and they allege that neither landlord verified the information.  

Relying on such information is a form of racial discrimination, the lawsuits say, because Black people are more likely to be evicted and more likely to be “stopped by law enforcement, arrested, convicted, and imprisoned at the federal, state, and local levels.” Enforcing categorical policies about evictions and criminal histories harms otherwise-qualified Black applicants, the lawsuits say. 

“We have such low vacancy rates, coupled with rising housing costs and wages not keeping up, people are struggling to find new housing,” said Amy Nelson, executive director of the Fair Housing Center. “Any sort of barrier can be devastating, and we’ve been doing a lot of outreach to get the word out about tenants’ screening-based barriers.”

A spokesman for Tricon Residential said in a statement: “Tricon adheres to all Fair Housing laws and believes the allegations in this suit are baseless.” The events detailed in the lawsuit occurred before Blackstone purchased the company; a Blackstone spokesman declined to comment. A Progress Residential spokesman provided this statement: “As a leading professional property manager, we are committed to promoting a fair and equitable screening process for all applicants. Although we do not comment on pending litigation, we take these allegations seriously and are currently reviewing the claims made in the lawsuit.” 

The vast majority of landlords require applicants to undergo third-party background checks, according to a 2019 report from the National Consumer Law Center, a nonprofit organization that advocates for low-income people. But information in background checks can be inaccurate, raising unfair hurdles for renters, advocates say. 

Private-equity-backed landlords have bought up large swaths of housing across the country in recent years, acquiring both single-family homes and apartment complexes. Such acquisitions have diminished the supply of affordable starter properties in many communities, research shows. Together, Tricon and Progress own at least 130,000 single-family homes throughout the country, the lawsuits say.

Both Progress and Tricon ban renters with criminal histories, the Indiana lawsuits contend. Progress denies applicants with felony convictions within the past 10 years, as well as convictions for certain felonies regardless of when they occurred and for certain misdemeanors within the past three years, one lawsuit says. Tricon won’t rent to applicants with felony convictions for the past seven years or convictions for other offenses, regardless of when they occurred, the other suit contends. Tricon also bars renters with evictions within at least the past two years.

Federal prosecutors have also alleged that tenant screening checks can be discriminatory. A civil case filed last month in the Eastern District of Missouri alleged that landlords of an apartment complex in Kinloch banned tenants with certain criminal histories from late 2015 to January 2024, a practice the suit said discriminated against prospective Black tenants. Such criminal histories “are known to have significant statistical racial disparities,” the suit said, adding that records considered by the landlords “are not accurate proxies for actual underlying criminal activity, and are not reliable predictors of future criminal activity.” The apartment complex didn’t respond to an emailed request for comment. 

The plaintiff in both lawsuits filed by the Indiana nonprofit group, Marckus Williams, tried to rent homes from both Tricon and Progress in November 2022, only to be turned down, he told NBC News. Williams’ convictions for cocaine possession in 2006 and 2012 had been expunged, but they appeared on his tenant screening reports, resulting in rejections from both landlords. 

“I sent them my expungement records, but I kept getting denied,” Williams recalled in a phone interview. “It makes you feel bad about yourself. Just give me a chance.”Williams, a former electrician, opened a grocery store in a part of Indianapolis that had become a food desert after several large supermarkets moved out. The store has expanded and is a success, but in the early days, he couldn’t find a place to live. For about a month during the Christmas holidays in 2022, he lived in his car. 

“It was really devastating to me,” Williams said. “Second chances are always supposed to be open.”

Because the practices cited in the lawsuits may have affected many prospective tenants, the law firm handling the cases, Relman Colfax PLLC, filed them as a class action. Plaintiffs will seek certification from the court.

Williams’ lawsuits follow heightened scrutiny of tenant screening systems by federal agencies, including the Federal Trade Commission and the Consumer Financial Protection Bureau. In October 2023, for example, the FTC sued TransUnion, a credit reporting agency, alleging that it failed to ensure the accuracy of eviction information in tenant screening reports it provided to landlords. Including incorrect information in its reports violated the Fair Credit Reporting Act, the FTC alleged. TransUnion settled the suit without admitting or denying the allegations and paid $15 million, the largest amount recovered in a tenant screening matter, the FTC said.  

The proposed order in the TransUnion case included a provision to prevent including sealed eviction records, unresolved eviction cases and multiple filings for a single eviction case. Such filings appeared on the rental screening reports Tricon used and resulted in automatic denials for Indiana applicants, according to the Fair Housing Center. 

“It can be hard for people to identify that they were discriminated against,” said Nelson, the center’s executive director. “We want safe communities where people can contribute, can build their lives, and that’s what fair housing laws are here to do.”

This story first appeared on NBCNews.com. More from NBC News:

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