Usually when government tries to control behavior though, people find a way around it (prohibition is a good example). 

Yes, indeed this is happening and I agree with Account Closed's comments, but beyond that I also think there is an erosion of prices being driven by the encouraging behaviors of the OTA's and travel industry as a whole. 

This is due the behavior of a typical market participant for the property.

Thoughts on scamminess of this, or is this normal tenant behavior looking for handouts?

The DNC list is designed to prevent such behavior and for good reason on both sides.

I created a spread sheet where I can rank people based on their applications and also on their behavior when I met them to show them the apartment- things like did they show up on time, was their vehicle (if they drove) reasonably clean, their need to be in the area (proximity to work, college student) etc. 

Which is one of the worst behavior patterns an investor can have! 

Even if you do live in the area, I'd stay away from this bank because of their very unprofessional behavior.

Having had a property burn to the ground due to tenant behavior (alleged neglegence, per insurance company), maybe I see things differently.

From their behavior, it’s been pretty clear that they are willing to hold these for a long time.From a few of their own statements, some of the big REO agents in my area, who used to represent hundreds of REO’s a month now have as few as five.