Actuarial Rent?

It’s the era of data-driven business. It’s the era of upending old business models. It’s the era of using information to make decisions.

(Horrifying, I know.)

So let’s cut to it: Would it be legal for a company or person to correlate renter demographics and other information with average cost to rehabilitate rental units and derive rent based on expected cost to clean the place up after the renter leaves? Think actuarial tables, like for insurance, except applied to rental properties.

Assume this really, truly is as blind as life insurance is, for example: Nobody’s got their thumb on the algorithm, nobody’s working their biases into the models. It’s literally just a simple statistical regression.

Depending on what you mean by “renter demographics” i would think that would go against Fair Housing Laws.

IANAL, but I can Google:

From some experience, I suspect racial minorities and people on public assistance would both come out of your algorithm with consistently higher rents.

So it would be hard to defend such a result in Court (and probably cost a lot in legal fees). And courts often look at the result of the actions. Even if some policy is applied in a neutral, fact-based manner, if the result is bias against any particular protected class, the court is likely to rule against it.

Rents are determined by the market, and nothing else … although this “algorithm” the OP speaks of is a part of that market value … employment opportunities, housing construction rates, hell, just a decent sized university will all effect rent values more than the “algorithm” …

10 years rent = capital costs

If a house will fetch $1500 a month rent, you should only pay $180,000 for that house … if a $5000 improvement let’s you hike rent by $41, it’s a go … the so-called “10 year cap rate” …

That’s not true everyplace, it’s hardly true anyplace … but it’s a place to start … the beat-up complex across the street from UCLA, cap rate might be two years … Akron OH, twenty years …

Renter demographics are not that useful … and a few are outlawed … all a landlord wants is someone who pays on time and in full and makes a good neighbor … people who qualify for this are common across all other demographics … except lawyers, never ever rent to lawyers …

You probably, as others said, couldn’t do it specifically on ‘renter demographics’, however, I don’t think it would be an issue to do it for the apartment as a whole.
IOW, if you have 5 rental properties and one of them requires an average of $500 above and beyond the deposit, you could raise rent by $50 a month to cover that. If it’s across the board, you wouldn’t even have to explain it.

However, that’s just good business practices. Again, you couldn’t do anything from one identical unit to the next within a complex, but it’s certainly expected and understood that after all is said and done, you come out ahead.

In other words: your example might be described as some type of -ist (racist, ageist, sexist etc), even if statistically it holds up, but an across the board increase should be okay.

I would suggest you might be able to adjust the rate based on what the renter’s previous landlords have to say, but that’s probably far to subjective and just going to cause problems with the landlord not charging the posted rents.

I don’t think this would work. Throughout our lives we use up the years we have, somewhat like a finite tangible resource, and actuaries take this into account when they crunch the numbers. But the time and expense required to rehabilitate a recently vacated apartment may not correlate at all to the length of time the tenants stayed there, or the landlord’s cumulative profit on the unit.

The whole point of equality legislation is that you are not to be judged by the statistical characteristics of the group into which someone cares to analyse you, but by your personal characteristics.

So, for example, it is statistically true that female employees take more sick leave than male employees. It would be unlawful for me, in considering a promotion, to prefer a male staff member over a female staff member for this reason. It would, however, be lawful for me to prefer another over her on the basis of her own sick leave record. (Or, at least, it would not be unlawful discrimination on the grounds of sex. Depending on the particular facts and the laws of the jurisdiction concerned, there might be an issue about discrimination on the grounds of health status or disability.)

So, if the jurisdiction the OP resides in has antidiscrimination legislation in place that applies to landlords letting accommodation, then classifying applicants by age, gender, ethnicity or other protected grounds and then making decisions based on characteristics statistically linked with those groups is likely to be unlawful.