Renters of color pay higher security deposits, more application fees

Rhea-AI Summary

The latest Zillow report reveals that renters of color face greater challenges in securing housing amidst a tight rental market. They are required to pay security deposits averaging $750, which is $150 more than their white counterparts' median of $600. Additionally, renters of color submit more applications, averaging three compared to two for white renters. With rental prices soaring by 17% over the past year and the national vacancy rate at a historic low, higher upfront costs contribute to limited housing mobility, particularly impacting Black and Latinx renters.

Positive

• Zillow offers an online rental application for a flat fee of $29, allowing renters to apply to multiple properties and includes a credit report.

Negative

• Renters of color face a median security deposit of $750, compared to $600 for white renters.
• Renters of color submit more applications on average (3 vs 2), leading to higher overall application costs.
• Median application fees are higher for renters of color, adding to financial strain.

Higher upfront costs add to the challenge faced by renters of color searching for a new home in today's tight rental market

• Renters of color pay security deposits more often than white renters, and the deposits they pay are typically $150 higher. 
• Black and Latinx renters report submitting more applications than white and Asian American and Pacific Islander renters. The typical white or Asian American and Pacific Islander renter submits two applications, while the typical Black or Latinx renter submits three.

SEATTLE, April 6, 2022 /PRNewswire/ -- Results from Zillow's Consumer Housing Trends Report show renters of color typically submit more applications — and pay more in application fees — before they secure a place to live than white renters do. Renters of color also typically pay a higher security deposit when they move in.ⁱ

The U.S. rental market is as competitive as it's been in decades, with the national vacancy rate lower than at any time since 1984.ⁱⁱ Rent prices have skyrocketed, up a record 17% in just the past year, prompting some priced-out renters to look for a more affordable home when their lease expires. About 9 in 10 renters paid a security deposit last year, with the typical deposit coming in at $700. A higher share of renters of color paid a deposit (93%) than white renters (85%), and the median amount paid by renters of color was higher, too — $750, compared to $600.

"Rents grew more last year than any year on record, forcing many renters to look for a more affordable option. About 2 in 5 renters who moved in the past year said a rent hike influenced their decision to move," said Manny Garcia, population scientist at Zillow. "Renters typically do not have much of a financial cushion, and the cost of finding a new place to live can be an expensive burden. Regrettably, renters of color are especially likely to experience rising rents, and when they shop for a new rental, generally report higher upfront costs, restricting the mobility that is often held up as a benefit of renting." 

A $750 security deposit represents a significant amount of a typical renter's wealth. Zillow's research indicates a typical renter holds $3,400 total across savings, checking, retirement and investment accounts. More than one-third (38%) of renters surveyed say they couldn't cover an unexpected expense of $1,000.

In addition to facing higher and more frequent security deposits, renters of color report submitting more applications and paying higher fees for those applications than white renters. In 2021, 61% of all renters applied for two or more properties — an 11-point increase from 2019 and five points higher than in 2020, likely owing to the tight rental market. The typical white or Asian American and Pacific Islander renter submits two applications, while a Black or Latinx renter typically submits three. More than one-third of renters of color submit five or more applications during their home search: that's true of 38% of Black and Latinx renters, 33% of Asian American and Pacific Islander renters, and only 21% of white renters.

With a median rental application fee of $50, the cost can add up quickly if renters need to apply for several properties. The burden is often greater for renters of color, who report paying a higher median application fee than white renters, on top of usually needing to apply to more rentals. Among renters who paid an application fee for the home they rent, the typical white renter reports paying $50, while a typical Black renter paid $65, a typical Latinx renter paid $80 and a typical Asian American and Pacific Islander renter paid $100.

The higher fees and number of applications for renters of color are likely partially attributable to their age, income and geography. The typical renter of color is two years younger than the median white renter, meaning two fewer years of potential income growth. White renters are also more likely to rent in rural markets and the Midwest, both of which are generally less expensive. Asian American and Pacific Islander and Latinx renters, in particular, are more likely to rent in the West, which includes many of the country's most expensive and competitive rental markets.

Expanding access to credit could help improve outcomes for Black and Latinx renters. Nearly half of white renters (46%) say they were completely certain they would qualify for a rental, compared to 38% of Latinx renters and 34% of Black renters. Credit checks are part of many rental applications, and Black and Latinx adults are more prone to being credit invisible and more often live in counties with higher levels of credit insecurity.

Renters looking to reign in application fees may have options. For a flat $29 fee, renters can use Zillow's online rental application to apply through Zillow for an unlimited number of participating properties within 30 days. The online application includes a credit report and background check, which saves landlords time while screening prospective tenants and provides them with the information needed to feel confident about each applicant. Renters can also offer additional context and explain any negative items on their rental and credit history.

	Share of Renters Who Paid a Security Deposit	Median Security Deposit*	Share of Renters Who Submitted an Application	Median Number of Applications Submitted	Median Application Fee**
All renters	88%	$700	86%	2	$50
White renters	85%	$600	84%	2	$50
Black renters	93%	$700	90%	3	$65
Latinx renters	91%	$650	87%	3	$80
Asian American and Pacific Islander renters	92%	$1,000	90%	2	$100

*Of renters who paid a security deposit
**Of renters who paid an application fee

About Zillow Group
Zillow Group, Inc. (NASDAQ: Z and ZG) is reimagining real estate to make it easier to unlock life's next chapter. As the most visited real estate website in the United States, Zillow® and its affiliates offer customers an on-demand experience for selling, buying, renting or financing with transparency and ease. 

Zillow Group's affiliates and subsidiaries include Zillow®, Zillow Offers®, Zillow Premier Agent®, Zillow Home Loans™, Zillow Closing Services™, Zillow Homes, Inc., Trulia®, Out East®, ShowingTime®, Bridge Interactive®, dotloop®, StreetEasy® and HotPads®. Zillow Home Loans, LLC is an Equal Housing Lender, NMLS #10287 (www.nmlsconsumeraccess.org).

 

ⁱ 2021 Zillow Consumer Housing Trends Report. Zillow Group Population Science conducted a nationally representative survey of more than 2,000 renters. The study was fielded between March and August 2021. For the purpose of this study, "renters" refers to household decision-makers who moved in the past year to a primary residence that they rent.
ⁱⁱ Source: U.S. Census Bureau, Current Population Survey/Housing Vacancy Survey, February 2, 2022.

 

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SOURCE Zillow

FAQ

What does the Zillow report say about security deposits for renters of color?

The Zillow report indicates renters of color pay a median security deposit of $750, $150 more than the $600 average for white renters.

How many applications do renters of color typically submit according to Zillow?

The report shows that renters of color submit an average of three applications, while white renters submit an average of two.

What are the recent trends in the U.S. rental market according to Zillow?

The rental market is highly competitive, with vacancies at a historic low and rental prices increasing by 17% over the past year.

What resources does Zillow provide for renters looking to apply for housing?

Zillow offers a flat fee of $29 for an online rental application that allows unlimited applications to participating properties within 30 days.

How does the burden of application fees differ among racial groups?

The median application fee for renters of color is higher, with Black renters averaging $65 and Latinx renters $80, compared to $50 for white renters.