- Nine current and former employees of the real estate startup Zumper stated that during their time there they systematically selected a few low-income tenants who received government support and inquired about apartments on the site.
- The federal government's Section 8 voucher program helps subsidize rental costs. For decades, many landlords and brokers have passed over tenants from Section 8 based on untrue stereotypes and stigmas.
- In some major markets – including New York City and Chicago, where the company's Zumper Select program has been the focus – it is illegal for a landlord or broker to discriminate against tenants based on Section 8 status.
- Leaked data shows that of 2,597 tenants in Chicago who completed profiles on Zumper's website and used the Section 8 program in 2018 and 2019, all but 42 were automatically disqualified by the system and marked internally as "unusable".
- Current and former employees and leaked data suggested that Zumper – an ambitious company backed by renowned investors like Blackstone, Kleiner Perkins, and Andreessen Horowitz – was exacerbating prejudice patterns that plagued the residential property 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 against Section 8 or any other protected tenant category.
- You can find more stories on the Business Insider homepage.
Sharon Whitley was looking for an apartment in Chicago last summer when she came across listing site Zumper, a San Francisco startup that has raised $ 150 million from well-known backers to hang out with listing giants like Zillow and Trulia compete.
Whitley, 59, worked at Chicago's O'Hare International Airport for decades, cleaning passenger aircraft cabins between commercial flights. She said she left the job due to disability in 2016 after having open heart surgery.
As a single mother of three, she said she has relied on the federal government's Section 8 voucher program since the mid-1990s, which gives her a monthly allowance of $ 1,000 towards the cost of her rent. Without the help, she said, she couldn't afford an apartment.
Whitley said she submitted her information to entries on Zumper's website. She said she also remembered filling out a Zumper profile and responding yes when asked if she relied on a Section 8 coupon.
"I expected someone to contact me," she said. "I never heard anything."
At the time, Whitely attributed her experience to the lack of responsiveness a tenant might encounter when looking for a new home.
Instead, she may have fallen victim to some subtle form of prejudice that has long plagued the real estate industry. For decades, many landlords and brokers have bypassed Section 8 tenants due to untrue stereotypes and stigmatization of government-subsidized tenants, some experts say.
A current employee and eight former employees who were still working for the company this year stated that during his time there, Zumper systematically sorted out tenants from Section 8 who inquired about apartments on the site.
Those sources, along with inside data showing Zumper was disqualified and the reasons, painted a picture of a startup that, despite ambitions to shake up the residential real estate industry, may have continued some of its ugliest discriminatory practices.
Whitley was among those on an internal list provided to Business Insider by a source that identified thousands of Section 8 tenants who have been disqualified by Zumper. The internal reason for her release was that she had been classified as "unusable". That foggy term was largely used as a code word within the company, four sources told Business Insider, to denote the disqualification of Section 8 tenants who had in fact been pushed aside because of their status as tenants receiving government support.
In some markets that Zumper operates in, including Chicago and New York City, it is illegal for landlords or brokerage firms to exclude tenants based on their Section 8 status.
Kelsey Grady, a Zumper spokeswoman, denied that there was any kind of discrimination by the company.
"The company was built on the simple foundation that everyone, regardless of economic situation, deserves a better, more rational rental process," Grady said. "This universal vision means that discrimination of any kind has never been tolerated."
According to sources, Zumper actively selected tenants with vouchers in accordance with Section 8
Co-founded in 2012 by Anthemos Georgiades, a London-born graduate of Harvard Business School and former advisor to the Boston Consulting Group, Zumper set out to grow the residential real estate business. In several financing rounds, top-class investors such as the Blackstone Group, Kleiner Perkins and Andreessen Horowitz collected. [Axel Springer, the parent company of Insider Inc., is an investor in Zumper.]
From 2017 the company began to move beyond its core business with listings into the brokerage of residential real estate in order to increase its sales with lucrative commissions and to brand the efforts as "Zumper Select".
Some real estate managers feared that their own listings would direct leads to apartments that Zumper Select was trying to fill. Meanwhile, landlords, who were used to promoting apartments directly to tenants on Zumper, disagreed with the idea that the company could now blend in and collect a costly commission.
Undeterred by the backlash, the company hired brokers in places like New York, Chicago, Houston, Atlanta, and Denver. Filters have also been developed at the back of the site and a tenant qualification team has been set up to help review inquiries to develop a better pipeline of candidates and improve the chances of reaching deals.
During this endeavor to distinguish the good from the bad leads, the company was discriminated against and dismissed tenants based on their status as voucher holders in accordance with Section 8.
A former agent in New York said that from the start of the Zumper Select effort, the company's executives showed little patience for the Section 8 leads. Recalling 2017 after receiving a handful of inquiries from tenants who owned coupons, the broker asked Taylor Glass-Moore, a co-founder and chief operating officer who had temporarily moved from San Francisco to Manhattan, about the introduction of Zumper Select to Manage Company Policy should be directed to tenants as per Section 8.
"He said, 'tell them nothing is available and hang up,'" the agent recalled.
All current and former Business Insider Zumper employees surveyed said they had either been informed personally, heard about it, or seen instructions from managers to decline requests from tenants under Section 8 earlier this year. In the meantime, the company has developed systems on its website that have effectively filtered out over 98% of tenants in a city who say they rely on the government's subsidy program. This was the result of an internal data report from Business Insider.
Grady told Business Insider in a written statement that Zumper's official internal policies were clear and that employees would be made aware that discrimination against tenants with a voucher based on source of income was illegal under the Fair Housing Act.
Grady also said Zumper Select has been closed and "is no longer part of Zumper's business".
In a follow-up statement, Grady said, "It is true that a majority of Section 8 renters who applied through Zumper Select have been disqualified because of credit requirements or budget. We agree that the bar is set for Zumper Select properties and above was a big reason we turned away from this model in 2019. "
However, the company has not yet left the brokerage business entirely. Earlier this year, the company bought MySpace, a Brooklyn-based residential real estate agency, as part of an obvious effort to reshape its brokerage business following the sinking of Zumper Select.
Continue reading: Millennials cannot afford to buy houses – the “rent forever” mentality is invigorating the real estate markets
According to a source, Zumper employees were concerned about the company's Section 8 treatment of tenants
Section 8 discrimination is not uncommon in large US cities. While several states and cities have explicitly made income source discrimination illegal, e.g. B. Tenants receiving Section 8 assistance are not illegal at the federal level – and even when it is banned, it is not uncommon to hear accusations from landlords who still reject voucher holders.
Because many of these renters are Black or Hispanic, the practice may lead to racial discrimination, according to some experts.
Regulators say it can be difficult to find those responsible and prosecute. Some brokerage firms point their fingers at rogue agents and unscrupulous landlords. Some property owners reject or justify their behavior because other legitimate disqualifying factors played a role in dismissing a Section 8 tenant – a defense that guard dogs and regulators say can be difficult to refute.
Business Insider spoke to three sources who worked on the Zumper team on tenant qualification through earlier this year. They said they communicated with prospective tenants daily via email, text, and phone, gathering information like move-in date, income, budget, and creditworthiness.
One of the sources, a person who had worked on the New York City-based team for several years, said the managers at the office had instructed them to fire all inquiring Section 8 tenants.
“They'd say, 'Well our landlords don't take that,'” the source said, paraphrasing the type of response that reminded them of five or six different managers. "We are not legally allowed to tell this to the tenant, so they asked us to email the tenant and say, 'We don't have any inventory that matches your criteria.'"
The source said that the instructions were always communicated orally rather than in writing, and because of this, they believed the company knew that such behavior was both unethical and illegal.
Zumper denied directing his employees to fire tenants under Section 8 or had a policy to fire them.
The source said that she and other tenants qualification team members were so concerned about the company's section 8 treatment of tenants that they came up with their own solutions to help out by looking for property management companies in the city that needed section 8 accepted tenants and forwarding these requests to them.
Another source who worked on the Chicago tenants qualification team said they were not instructed by managers to weed tenants out of Section 8, but that Zumper agents in that market almost always refused to deal with the heads of Team 8 passed Section 8 to cooperate. The source said they reported the behavior to management multiple times but were always met with shrugs.
"Our management was basically under no obligation to ensure that these tenants were treated equally," the source said.
Meanwhile, San Francisco-based Zumper engineers have developed a system that can automate the screening of tenants before they can even reach the tenant qualification team.
Tenants who have created a profile or entered personal information on the Zumper website or app have been asked to indicate whether they have used vouchers in accordance with Section 8. This comes from four sources in the Chicago office who are familiar with the company's online equipment and procedures. Almost everyone who answered yes was disqualified by the company's screening software before any company employee could ever see their request.
The source, who worked on the Chicago tenant qualification team, said that San Francisco management silently deployed the filters on site and only inadvertently discovered that the system was silently pushing aside almost all of the Section 8 tenants.
The tenants qualification team were able to collect hundreds of leads from the website every day, and sometimes a tenant said they were following a request for a listing because they had no response.
The source said they were investigating several such cases, looking for the tenant by name on Zumper's Salesforce lead management system. In several cases, they would have found evidence that the tenant had actually previously contacted a particular apartment but had been disqualified by the system for no obvious reason other than disclosing that they had used a coupon under Section 8.
The source said the only way these tenants could get through in a follow-up communication was to use different identifying information the second time, such as a different email address and phone number, which led the system to believe they were even another tenant although they had the same name.
The source said they contacted Parker Mallchok, the San Francisco-based manager of the tenant qualification team, about the problem. The source said instead of instructing them to forward the request to an agent, Mallchok asked them to manually disqualify the tenant's follow-up exam from Section 8.
Mallchok did not respond to a request for comment.
Another source who served as a manager in the Chicago office said they too found evidence of the company filtering renters out of Section 8 after a routine review of the company's Salesforce reporting. The manager said they told Mallchok they believed it was illegal and that they brought the concerns to high-level executives, including Brian Coyne, the company's chief business officer and Glass-Moore, the co-founder and chief operating officer.
The person said that Coyne and Glass-Moore both agreed that automatic disqualification should end and that the company stopped them soon after, either in late 2019 or early 2020.
Attempts to reach Coyne and Glass-Moore were unsuccessful.
Continue reading: Developers have no incentive to solve the affordable housing crisis. Here's what a property manager believes could change that.
Internal data suggests that Zumper picked thousands of applicants from Section 8
Zumper relied on data to track the tens of thousands of leads he had received and hoped to convert them into commissions.
A source showed Business Insider a report produced by Zumper's Salesforce customer relationship management system that indicated that 2,597 tenants in Chicago who completed profiles on the Zumper website in 2018 and 2019 identified themselves as Section 8 users had. All but 42, according to the report, were automatically disqualified by the system, which corresponds to a rejection rate of over 98%.
In almost all cases, the reason given for their release was that they were deemed "unusable". One word four former employees alleged was used to cover up the real reason for their refusal: they used coupons as per Section 8.
Zumper denied that "unusable" was a term reserved only for Section 8 tenants or that it was used to disguise the serial layoffs of Section 8 tenants in his records.
Grady, Zumper's spokeswoman, described "unusable" as a catch that mostly meant that a tenant had a below-average credit rating or an inadequate budget. In the areas that indicated why each of the 2,597 Section 8 tenants were disqualified from the Company, hundreds were attributed "budget" and / or "credit score" – a layoff – alongside the term "unusable" as the reason for their dismissal That Grady couldn't explain it, and that suggested that "unusable" had a separate meaning.
The company also declined to explain why "unusable" was almost never used in the records shared with Business Insider to explain disapproval from tenants who reported not using Section 8 coupons. For example, over the same period in 2018 and 2019, of the 26,376 tenants who profiled Zumper's website and did not rely on coupons from Section 8, only two were rated "unusable," the data showed.
Zumper told Business Insider that roughly half of the non-Section 8 renters who chose to use Zumper Select were ultimately laid off for other reasons, including poor budgets or poor creditworthiness.
Zumper acknowledged that the disqualification rate for renters was much higher in Section 8. The company said that nearly every Section 8 renter looking to rent an apartment with Zumper Select had been turned away in both Chicago and New York City, the two largest markets. It has been denied that the high rate of disqualification is related to any form of discrimination.
Grady said approximately nine out of ten tenants in Section 8 were eliminated because they had credit scores that were below the minimums Zumper had accepted from the tenants he had worked with.
The rest were disqualified because of other factors, Grady said, including budgets that were too low for Zumper's housing stock or "previous evictions, criminal records, moving-in issues" or because they "worked with other agents" or "were no longer interested in the process." "
Tenant Discrimination Experts told Business Insider that credit score issues are a worn out excuse in the residential real estate industry to target Section 8 tenants and other tenants receiving subsidies.
"A realtor with a credit score cutoff definitely throws a red flag," said Stephanie Rudolph, fair living director for tenant monitoring group Communities Resist and former director of income discrimination at the Human Rights Commission, a New York agency that does the Monitored landlord and broker misconduct in the Section 8 system and other government voucher programs.
"If you have both a credit score cutoff and a track record of essentially not doing business with Section 8 tenants, I am incredibly skeptical that you are not excluding tenants simply for being in Section 8." " " She said.
Rudolph said that while tenants in Section 8 are economically disadvantaged, they often have solid credit. Even for tenants with bad credit, their score may not be relevant if their voucher, as well as any other government support they receive, covers the majority or all of the rent of a given apartment. It doesn't seem that Zumper ever tried to make that decision.
Katrina Young, another Chicago resident who relies on Section 8 support and who, according to the company's records, was fired by Zumper for being "unusable," said she sensed the company was looking for her unjustly pushed aside an apartment in 2019.
"I was upset. I was crazy," said Young. "I have never witnessed anything like this."
Young, who said she works full-time in a food processing plant and has four children and two grandchildren, shared her experience with the company with her Section 8 advisor, who suggested that she file a formal complaint. Young said she refused.
"I didn't have time to go back and worry about it," said Young. "I had to find a place to live."