In California, a new bill, AB2747, is in the spotlight for potentially changing the landscape of rent payment practices. If signed into law, tenants in the state might see a positive impact on their credit reports for timely rent payments. Assembly Bill 2747, proposed by District 17 State Assemblyman Matt Haney, allows California tenants to request their landlords to report their on-time rent payments to credit rating agencies.
Haney believes that this legislation, if passed, could rectify the current situation where late or missed rent payments are recorded but timely payments go unnoticed in credit scores. The Democrat lawmaker from San Francisco expressed in a recent press release, “It’s unfair and further entrenches millions of tenants in cycles of debt and financial challenges.”
Under current laws, most landlords are not required to report tenants’ on-time payments to credit bureaus but can report instances of late payments. The analysis of the bill reveals that currently, only landlords of government-assisted housing projects and those owning 15 or more units are mandated to report tenants’ timely payment records.
Haney’s press release pointed out that the records of on-time payments for 17 million California tenants not receiving government assistance are not being reported, creating difficulties for some individuals when searching for housing.
Recent graduates like David Ramirez, the President of the Associated Students Government Affairs at the University of California, Los Angeles, see the potential benefits of such a law. Ramirez emphasized the importance of good credit for future endeavors such as car purchases and leasing other apartments but noted that his major steady payment has not been reported to credit agencies.
According to the proposed law, landlords can charge up to $10 or the actual cost for reporting tenants’ on-time payments to at least one national consumer reporting agency monthly.
However, some housing providers argue that for smaller “mom-and-pop” landlords with fewer than 50 units, the actual costs might be significantly higher due to the lack of established partnerships with major credit bureaus.
Daniel Yukelson, the Executive Director of the Apartment Association of Greater Los Angeles (AAGLA), expressed concerns about the potential impact on small landlords, stating that regulatory burdens and excessive legislation could stifle them as they may not fully grasp the risks and complexities of rental housing business.
Yukelson highlighted that under the bill, small landlords would need to establish partnerships with credit rating agencies, which could be a lengthy and complex process. He stated, “AB2747 will essentially be impossible to comply with, forcing many small-scale rental providers to adopt costly software products or hire third-party services just to meet the reporting requirements.”
For reporting through third-party agencies like Experian subsidiary Rent Bureau, landlords would need expensive property management software requiring annual licensing fees of thousands of dollars or additional service costs to operate the software.
Yukelson predicted that in California, the rental housing landscape would see a shift towards larger property owners. He suggested, “The future of California rental housing will only involve big corporations taking over all rentals. The era of small and family-style owners providing affordable housing will be gone for good.”
If the bill passes, landlords must inform tenants about the option to join the good credit reporting program and associated fees in leases starting on January 1, 2025, or later but no later than April 1. They must issue renewal notices annually to allow tenants to choose whether to participate.
As per the bill’s provisions, tenants can opt-out of reporting at any time; however, once they opt-out, they cannot rejoin for six months.
Supporters of the legislation include the Associated Students Government at UC campuses, the California School Employees Association (CSEA), and the Service Employees International Union (SEIU), representing service industry workers.
According to a recent state Senate analysis report, opponents of the bill include the California Rental Housing Association (CalRHA), Disability Rights California (DRC), the largest disability rights organization in the U.S., and several faith-based advocacy groups and legal centers.