Zumper, a home-listing site that has raised $150 million from backers like Blackstone and Kleiner Perkins, weeded out thousands of Section 8 renters in a practice some experts say may amount to discriminationSeptember 15, 2020
- Nine current and former employees at the real-estate startup Zumper said that during their time there it systematically screened out some lower-income tenants receiving government assistance who inquired about apartments on its site.
- The federal government's Section 8 voucher program helps subsidize the cost of rent. Many landlords and brokers have for decades passed over Section 8 renters based on untrue stereotypes and stigmas.
- In some major markets — including New York City and Chicago, where the company's Zumper Select program was focused — it is illegal for landlords or brokers to discriminate against renters based on Section 8 status.
- Leaked data shows that of 2,597 renters in Chicago who filled out profiles on Zumper's site in 2018 and 2019 and said they used the Section 8 program, all but 42 were automatically disqualified by the system and labeled internally as "unserviceable."
- The current and former employees and the leaked data suggested that Zumper — an ambitious company with backing from prestigious investors such as Blackstone, Kleiner Perkins, and Andreessen Horowitz — exacerbated patterns of prejudice that have plagued the residential market for decades.
- A Zumper representative denied that there was any discrimination based on Section 8 status and told Business Insider that the company does not tolerate discrimination in any matter relating to Section 8 or any other protected renter categories.
- Visit Business Insider's homepage for more stories.
Sharon Whitley was searching for an apartment in Chicago last summer when she stumbled onto the listings site Zumper, a San Francisco startup that has raised $150 million from big-name backers to compete with listings giants such as Zillow and Trulia.
Whitley, 59, worked for decades at Chicago's O'Hare International Airport cleaning passenger-airplane cabins between commercial flights. She said she left the job on disability in 2016 after undergoing open-heart surgery.
A single mother of three, she said she had relied since the mid-1990s on the federal government's Section 8 voucher program, which provides her a $1,000-a-month subsidy toward the cost of her rent. Without the aid, she said, she wouldn't be able to afford an apartment.
Whitley said she submitted her information to listings posted on Zumper's site. She said she also remembered filling out a Zumper profile and answering yes when asked whether she relied on a Section 8 voucher.
"I did expect someone to contact me," she said. "I never heard anything."
At the time, Whitely chalked up her experience to the lack of responsiveness any renter might encounter during a search for a new home.
Instead, she may have been the victim of a subtle form of prejudice that has long plagued the real-estate industry. For decades, many landlords and brokers alike have passed over Section 8 renters based on untrue stereotypes and stigmas attached to government-subsidized tenants, some experts say.
One current employee and eight former employees who worked at the company as recently as this year said that during their time there Zumper systematically screened out Section 8 tenants who inquired about apartments on its site.
These sources, along with inside data showing the tenants Zumper disqualified and the reasons, painted a picture of a startup that, despite ambitions to shake up the residential real-estate industry, may have perpetuated some of its ugliest discriminatory practices.
Whitley was among those on an internal list provided to Business Insider by a source showing thousands of Section 8 tenants who were disqualified by Zumper. The internal reason given for her dismissal was that she had been deemed "unserviceable." That foggy term was overwhelmingly used within the company as a code word, four of the sources told Business Insider, to label the disqualification of Section 8 tenants who had in reality been pushed aside because of their status as renters who received government assistance.
In some of the markets where Zumper operated, including Chicago and New York City, it is illegal for landlords or brokerage firms to exclude renters because of their Section 8 status.
Kelsey Grady, a Zumper spokeswoman, denied that any kind of discrimination by the company had taken place.
"The company was built on the simple foundation that everyone, regardless of economic situation, deserves a better, more streamlined renting process," Grady said. "This universal vision means that discrimination of any kind has never been tolerated."
Sources say Zumper actively screened out tenants with Section 8 vouchers
Cofounded in 2012 by Anthemos Georgiades, a London-born Harvard Business School graduate and former consultant for the Boston Consulting Group, Zumper set out to upend the residential real-estate business, raising $150 million in several funding rounds from high-profile investors such as the Blackstone Group, Kleiner Perkins, and Andreessen Horowitz. [Axel Springer, Insider Inc.'s parent company, is an investor in Zumper.]
Beginning in 2017, the company started pushing beyond its core listings business into residential brokerage so it could boost its revenue with lucrative commissions, branding the effort "Zumper Select."
Some brokerage executives worried that leads from their own listings would be funneled away to apartments that Zumper Select was trying to fill. Meanwhile, landlords who were used to advertising apartments directly to renters on Zumper balked at the idea that the company might now insert itself and charge a costly commission.
Unfazed by the backlash, the company hired brokers in places like New York, Chicago, Houston, Atlanta, and Denver. It also developed filters on the back end of its website and created a renter-qualification team to help it screen inquiries so it could develop a better pipeline of candidates and improve its chances of arranging deals.
It was during this push to differentiate the good leads from the bad, the sources said, that the company veered into discrimination, dismissing renters based on their status as Section 8 voucher holders.
A former agent in New York said that executives at the firm showed little patience for Section 8 leads from the beginning of the Zumper Select effort. The broker remembered in 2017, after receiving a handful of inquiries from voucher-holding tenants, asking Taylor Glass-Moore, a cofounder and chief operating officer who had relocated to Manhattan temporarily from San Francisco to help manage the launch of Zumper Select, what the company's policy should be toward Section 8 renters.
"He said, 'Tell them nothing is available, and hang up,'" the broker recalled.
All the current and former Zumper employees Business Insider interviewed said they were either personally given, had heard about, or had witnessed directives from managers to discard inquiries from Section 8 tenants as recently as early this year. Meanwhile, on its website, the company created systems that in one city effectively filtered out over 98% of tenants who disclosed that they relied on the government subsidy program, an internal data report obtained by Business Insider showed.
Grady told Business Insider in a written statement that Zumper's official internal policies were clear and that employees were made aware that source-of-income discrimination against tenants with a voucher was illegal under the Fair Housing Act.
Grady also said Zumper Select had been disbanded and "is no longer part of Zumper's business."
In a follow-up statement, Grady said: "It is true that a majority of the Section 8 renters who applied through Zumper Select were eventually disqualified due to credit requirement or their budget. We agree that the bar was high for Zumper Select properties and a big reason why we shifted away from this model in 2019."
The company hasn't exited brokerage altogether, however. Earlier this year, it purchased MySpace, a Brooklyn-focused residential real-estate agency, as part of an apparent effort to remake its brokerage operations after scuttling Zumper Select.
Read more: Millennials can't afford to buy homes — here's how the 'rent forever' mentality is upending real estate markets
A source said Zumper staffers were troubled by the company's treatment of Section 8 renters
Section 8 discrimination is not uncommon in major US cities. While several states and cities have explicitly made it illegal to discriminate based on source of income, such as renters who receive Section 8 assistance, it is not illegal at the federal level — and even where it is outlawed, it isn't uncommon to hear accusations of landlords still rejecting voucher holders.
Because many of these renters are Black or Hispanic, the practice can amount to race-based housing discrimination, some experts say.
Regulatory agencies say that finding and prosecuting those responsible can be tricky. Some brokerage firms point the finger at rogue agents and unscrupulous landlords. Some property owners point back, or justify their conduct by saying other legitimate disqualifying factors were at play in turning a Section 8 tenant away — a defense that can be hard to disprove, according to watchdogs and regulators.
Business Insider spoke with three sources who worked on Zumper's renter-qualification team until earlier this year. They said they communicated daily with prospective renters over email, text, and telephone, gathering information such as their move-in date, income, budget, and credit score.
One of the sources, a person who worked on the team based in New York City for several years, said managers in the office instructed them to dismiss any inquiring Section 8 renters.
"They would say, 'Well, our landlords don't take that,'" the source said, paraphrasing the kind of response they recalled five or six different managers giving. "We're not legally allowed to say that to the renter, so they told us to email the tenant back and say, 'We don't have any inventory that matches your criteria.'"
The source said that the instructions were always communicated verbally, not in writing, and that because of this, they believed the company knew such conduct was both unethical and illegal.
Zumper denied that it instructed its employees to dismiss Section 8 renters or had any policy to dismiss them.
The source said they and other staffers on the renter-qualification team grew so troubled by the company's treatment of Section 8 tenants that they devised their own solutions to try to help, researching real-estate-management companies in the city that did accept Section 8 tenants and referring those inquiries to them.
Another source, who worked on the renter-qualification team in Chicago, said that they were not told by managers to screen out Section 8 tenants but that Zumper agents in that market almost always refused to work with Section 8 leads the team passed along. The source said they reported the behavior to management on several occasions but were always met with a shrug.
"Our management was basically just not committed to making sure that those renters got equal treatment," the source said.
Meanwhile, Zumper engineers based in San Francisco created a system that would automate screening out renters before they could ever even get to the renter-qualification team.
Renters who created a profile or entered personal information on Zumper's website or app were prompted to disclose whether they used Section 8 vouchers, according to four sources in the Chicago office familiar with the company's online apparatus and procedures. Almost everybody who answered yes was disqualified by the company's screening software before a human at the firm could ever lay eyes on their inquiry.
The source who worked on the renter-qualification team in Chicago said that because management in San Francisco had quietly deployed the filters on the site, they only accidentally discovered that the system was silently brushing aside almost all Section 8 renters.
The renter-qualification team could take in hundreds of leads from the website a day and sometimes a renter would say they were following up on an inquiry about a listing because they had not heard back.
The source said they investigated several such cases, searching for the renter within Zumper's Salesforce lead-management system by name. In multiple instances, they said, they discovered evidence that the tenant had, in fact, previously reached out about a particular apartment but had been disqualified by the system, for no other apparent reason than disclosing that they used a Section 8 voucher.
The source said the only way those renters had been able to get through in a follow-up communication was by using different identifying information the second time around, such as another email address and phone number, tricking the system into thinking they were another renter even though they had the same name.
The source said they contacted Parker Mallchok, the San Francisco-based manager of the renter-qualification team, about the issue. The source said that rather than instructing them to pass the inquiry to an agent, Mallchok told them to manually disqualify the Section 8 renter's follow-up inquiry.
Mallchok did not respond to a request for comment.
Another source who served as a manager in the Chicago office said they too discovered evidence that the company was filtering out Section 8 renters after a routine review of the company's Salesforce reporting. The manager said that they told Mallchok they believed it was illegal and that they brought the concerns to higher-level executives, including Brian Coyne, the company's chief business officer, and Glass-Moore, the cofounder and chief operating officer.
The person said that Coyne and Glass-Moore both agreed auto-disqualification should stop and that soon after, in either late 2019 or early 2020, the company discontinued it.
Attempts to reach Coyne and Glass-Moore were unsuccessful.
Read more: Developers have zero incentive to fix the affordable-housing crisis. Here's what one real estate exec thinks could change that.
Internal data suggests Zumper screened out thousands of Section 8 applicants
Zumper relied on data to track the tens of thousands of leads it received and hoped to convert into commissions.
A source showed Business Insider a report, generated by Zumper's Salesforce customer-relationship-management system, indicating that 2,597 renters in Chicago who filled out profiles on Zumper's site in 2018 and 2019 had identified themselves as using Section 8 assistance. All but 42, the report showed, were automatically disqualified by the system, a rejection rate of over 98%.
In almost every case, the reason given for their dismissal was that they had been deemed "unserviceable," a word that four former employees alleged was used to cloak the true reason for their rejection: they used Section 8 vouchers.
Zumper denied that "unserviceable" was a term reserved only for Section 8 renters or that it served as a way to disguise the serial dismissal of Section 8 tenants in its records.
Grady, Zumper's spokeswoman, described "unserviceable" as a catchall that most often meant a renter had a sub-par credit score or insufficient budget. Yet in the fields that disclosed why each of the 2,597 Section 8 tenants had been disqualified by the company, hundreds had "budget" and/or "credit score" attributed as the reasons for their dismissal alongside the term "unserviceable" – a redundancy that Grady could not explain and that suggested "unserviceable" had a separate meaning.
The company also declined to explain why in the records shared with Business Insider "unserviceable" almost never was used to explain the rejection of renters who said they did not use Section 8 vouchers. During the same period in 2018 and 2019, for instance, of the 26,376 renters who created profiles on Zumper's site and said they didn't rely on Section 8 vouchers, only two were deemed "unserviceable," the data showed.
Zumper told Business Insider that about half of the non-Section 8 renters who sought to use Zumper Select were ultimately dismissed for other reasons, including an insufficient budget or a low credit score.
Zumper acknowledged that the disqualification rate for Section 8 renters was much higher. The company said that almost every Section 8 renter who sought to use Zumper Select to find an apartment had been turned away in both Chicago and New York City, its two largest markets. It denied that the high disqualification rate was related to any form of discrimination.
Grady said that roughly nine out of 10 Section 8 tenants were eliminated because they had credit scores below the minimums that Zumper accepted from the renters it worked with.
The rest were disqualified for other factors, Grady said, including having budgets that were too low for Zumper's inventory of apartments, or "prior evictions, criminal records, move-in timing issues," or because they "were working with other agents" or "were no longer interested in the process."
Renter-discrimination experts told Business Insider that credit-score issues were a well-worn excuse in the residential real-estate industry to target Section 8 renters and other tenants who receive subsidies.
"A brokerage that has a credit-score cutoff definitely raises a red flag," said Stephanie Rudolph, the director of fair housing at the tenant watchdog and advocacy group Communities Resist and the former director of the source-of-income-discrimination unit at the Commission on Human Rights, a New York City agency that polices landlord and brokerage misconduct in the Section 8 system and other government-voucher programs.
"If you have both a credit-score cutoff and then a track record of basically doing no deals with any Section 8 tenants, then I'm incredibly skeptical that you're not excluding renters simply on the basis of their participation in Section 8," she said.
Rudolph said that Section 8 tenants, despite being economically disadvantaged, often have solid credit. Even for renters with poor credit, their score may not be relevant, she said, if their voucher, as well as any other government assistance they receive, covers the majority or all of a particular apartment's rent. It doesn't appear that Zumper ever sought to make that determination.
Katrina Young, another Chicago resident who relies on Section 8 assistance and was dismissed by Zumper, according to the company's records, because she was "unserviceable," said she sensed the firm had unfairly pushed her aside during her search for an apartment in 2019.
"I was upset. I was mad," Young said. "I never encountered that before."
Young, who said she works full time in a food-processing facility and has four children and two grandchildren, said she reported her experience with the company to her Section 8 counselor, who suggested she file a formal complaint. Young said she declined to do so.
"I didn't have the time to go back and deal with it," Young said. "I needed to find a place to live."
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