When it comes to junk fees, nobody can hold a candle to landlords. Not even mortgage lenders.
The National Consumer Law Center, a nonprofit based in Boston and Washington, D.C., lists 16 “gotcha” fees in a new report on the charges faced by prospective renters.
Admittedly, some are not that onerous. For example, nearly all property managers charge application fees, which they use to pay for credit reports and criminal background checks.
The NCLC also found some add-ons that were questionable at best, including convenience fees, roommate fees and processing fees. Some landlords charged a “January fee” for no other apparent reason than it being the first month of the new year.
For landlords, it’s all about finding ways to monetize whatever they can get away with. For instance, one Tampa firm sends invoices for submetered water and sewer service. Nothing underhanded there; most places charge for utilities. But it also charged a meter-reading fee and a billing fee.
The extra charges amounted to only a few bucks. But multiply that by each tenant, and you end up with a nice little profit center.
About that billing fee: Tenants were dunned electronically, not via snail mail, so it wasn’t to cover the extra cost of paper and postage. But no matter how the invoice is delivered, why should anyone have to pay to be billed? How can you pay without a bill?
Pure and simple, these are the costs of doing business, and they should be borne by the property owner – not the tenants.
HUD Pushes Landlords to Cut Fees
Here’s another ridiculous charge: A Kansas City property demands a $200 one-time fee for pets, plus $15 a month. Again, nothing unusual there; most places charge for cats and dogs. But this place also charges for fish. Not only that, but it prohibits “aggressive” breeds. Of fish.
Meanwhile, some owners are looking to save money by operating their properties without any on-site personnel: no resident manager, no maintenance people, no security staffers. One outfit reportedly already operates several unstaffed properties, and plans to add more.
The NCLC report comes in the wake of an open letter from Marcia Fudge, secretary of the Department of Housing and Urban Development, who called on the housing industry to address such fees. These charges, she said, raise costs and hit vulnerable people the hardest.
“Many renters today face fees that are hidden, duplicative or unnecessary,” Fudge wrote. “These fees limit options for renters and strain household budgets, particularly for renters with low and modest incomes who already face high rental-cost burdens.”
In particular, the HUD secretary cited nonrefundable application fees, which she said can run into hundreds or even thousands of dollars for tenants applying at multiple places. She also noted that while landlords use the fees to pay for tenant screening reports, those reports often “have inaccurate information and questionable validity in predicting renter behavior.”
Fudge also mentioned such hidden fees as move-in charges, late charges, high-risk fees, security bonds and convenience fees for tenants who pay their rents online. But the NCLC went further, noting that the vast majority of landlords impose excessive late fees and more than half charge other bogus fees.
Fees Hit Tenants Hard
To compile its list, the NCLC surveyed legal services and nonprofit attorneys about the types of fees they have seen. The survey took place in November and December of last year.
Of the 95 responses from 26 states and the District, nearly 9 out of 10 said landlords collect application fees, and almost 3 out of 4 said they have seen utility-related charges. So far, nothing too dubious. But 87 percent said landlords also impose excessive late charges. Moreover, 68 percent had seen processing or administrative fees, 60 percent noticed convenience fees and 59 percent reported seeing insurance fees.
A small number (7 percent) reported seeing fees to report rental payment information to credit bureaus. And the aforementioned “January fee” was reported by two Minnesota advocates – “for seemingly no reason,” the survey said.
Noting that some 19 million households – nearly half of all renters in the U.S. – spend more than a third of their incomes on housing, April Kuehnhoff, a senior attorney at the law center and a co-author of the report, said, “There simply isn’t room in their budgets for junk fees.”
The report calls on the Federal Trade Commission and state legislatures to investigate landlords who impose burdensome fees, calling them “unavoidable and exploitative.” The FTC should develop guidance to prevent this practice, it said, and states must limit or ban fees that exceed landlords’ costs.
Fudge had essentially the same message in her open letter, urging all housing providers as well as state and local governments to “take action to limit and better disclose fees charged to renters in advance of and during tenancy.” Fees, she said, should reflect “the actual and legitimate costs to housing providers.”
The secretary’s message amplifies the Biden administration’s “Blueprint for a Renters Bill of Rights,” which challenges stakeholders to commit to clear and fair leases without hidden or illegal fees.
Since the White House launched the challenge, Fudge wrote, many state and local governments and housing providers, as well as several rental platforms and small property owners, have announced policies aligned with the program. Among other things, they have agreed to limit application fees and allow applicants to reuse their applications multiple times at no extra cost.
Lew Sichelman has been covering real estate for more than 50 years. He is a regular contributor to numerous shelter magazines and housing and housing-finance industry publications. Readers can contact him at firstname.lastname@example.org.