Banning credit checks won’t help Illinois’ poor get housing

Illinois state lawmakers are trying to ban landlords from using credit histories to judge potential tenants. Doing so could make it harder for low-income tenants to find housing.

Most people would agree housing providers should judge prospective tenants fairly, so why is Illinois trying to stop them from using one of the best tools for doing so?

Senate Bill 1728 attempts to make it “a violation of the Real Estate Transactions Article of the Act to…discriminate using credit score and history including insufficient credit history” when determining the terms of or whether to enter into a landlord-tenant agreement.

It aims to lump credit scores in with civil rights protections such as familial status, immigration status and source of income – things that are outside of one’s control or have no bearing on the ability to pay rent consistently and on time.

Credit, by contrast, is expressly meant to serve that purpose.

The legislation might have good intentions – such as helping those who are recovering from financial hardship or young people who have little to no credit history – access housing. These good intentions fail to counteract the harm this bill is likely to create if it becomes law.

The reality is landlords need some metric to measure whether a potential tenant will be able to pay rent consistently and on time. Credit is a good and objective measure of that. Without it, landlords may have to rely on more subjective and less predictive criteria.

A similar negative impact has been found regarding credit screenings for employment. If this kind of cautionary renting doesn’t take place, other landlords may raise rents or institute large security deposits to offset the increased risk they are taking on as a result.

Additionally, owning rental property is a business. The more restrictions that make it harder to ensure that business will be profitable, the less likely people are to enter the business. This could lead to a stagnation in the increase of available rental units, especially naturally affordable ones that are often run by families.

It could also increase evictions. Without credit score evaluations, more tenants may be approved who can’t afford the rent long-term. That would lead to missed payments, court costs and displacement – hurting both tenants and landlords.

If Illinois leaders believe credit score checks are hurting the ability of young or low-income people to access housing, they should take steps to address their concerns at the source by improving access to financial literacy, rather than covering up the real issue. Illinois currently trails every state in the Midwest except South Dakota in financial literacy, and ranks 32nd nationwide.

Illinois lawmakers need to accept that policies restricting the way housing providers do business is not going to fix the lack of affordable housing or the challenges residents face in accessing and keeping it. If anything, bills like this will only make it worse.