Higher upfront costs are adding to the challenges faced by renters of color in today’s tight rental market, reveals a new report from Zillow.
According to Zillow’s Consumer Housing Trends Report, renters of color typically submit more applications—and pay more in application fees—before they obtain housing than white renters do. In addition, renters of color typically pay a higher security deposit.
With the nation seeing continued rising rents, many priced-out renters are looking for more affordable options when their leases expire.
“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 experience 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.”
According to Zillow, about 9 in 10 renters paid a security deposit last year with the typical deposit being $700. A higher share of renters of color, 93%, paid a deposit compared with 85% of white renters. The median amount paid by renters of color also was higher at $750 compared with $600.
With Zillow’s research showing a typical renter holds $3,400 across savings, checking, retirement, and investment accounts, more than one-third of renters surveyed reported they couldn’t cover an unexpected expense of $1,000.
In addition to the security deposits, additional fees are quickly adding up for renters. Last year, 61% of all renters applied for two more or properties, an 11-point increase from 2019 and 5 points higher than 2020. According to Zillow, 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 search.
Factoring in a median rental application fee of $50, the cost can multiply if there’s a need to apply at numerous properties. In addition, renters of color reported a higher median application fee. A typical Black renter paid $65, a typical Latinx renter paid $80, and a typical Asian-American and Pacific Islander renter paid $100, according to Zillow.
“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,” stated Zillow. “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.”
