If you moved recently, you probably noticed that it’s not just the rent that eats up your budget. There are also application fees, move-in fees, convenience fees, administrative fees, key fees, broker fees, and more. Add them all up and moving to a new place might not seem so appealing anymore.
How hidden fees keep renters trapped
Signing a new lease often comes with high upfront costs that some renters can’t afford. It doesn’t have to be this way.
Abdallah Fayyad was a correspondent at Vox, where he covers the impacts of social and economic policies. He was the author of “Within Our Means,” a biweekly newsletter on ending poverty in America.
Application fees, for example, can range from $20 to well over $100, and if you don’t get approved for one place, you have to spend more money on other applications. These fees don’t affect people equally, either: Those who often face discrimination in housing, including Black and Latino people, tend to pay more of these costs because, on average, they have to apply to more places to secure a home.
Then there’s the big lump sum: Once someone gets approved for an apartment, they’re usually required to front the first month’s rent along with a security deposit, which can cost as much as another month of rent. In New York City, for example, the average upfront cost for renters — which include the first month’s rent, a security deposit, and a broker fee — is $10,400.
But even in less extreme locales, the costs of moving to a new home are a barrier for many residents. “The lowest-income renters are already paying 50, 60, 70 percent of their income on rent, and these additional fees make it harder for them to even possibly move to a home that might be more affordable for them,” said Sarah Saadian, the National Low Income Housing Coalition’s senior vice president of public policy and field organizing.
The problem is not that all of those costs are unreasonable — though some certainly are. But even when it comes to paying the first month’s rent along with a security deposit, the upfront cash that’s required to merely set foot in a new home can be too much and even deter those who could afford the base rent.
When it comes to the housing crisis, fees and upfront costs aren’t often part of the conversation. That’s certainly understandable — the bigger problem, as you may have heard, is that the rent is too damn high. But these costs can have serious consequences for renters, and alleviating them can help make housing more accessible.
Why lawmakers should take renter fees seriously
There are three main reasons why fees and other upfront costs make the housing problem worse.
First, upfront costs limit people’s ability to move to a bigger space when they have kids or even downsize when they retire. That’s true even outside notoriously expensive places. Even “in a market unlike New York City, if there was a lot of available housing, the fact that you’d have these upfront costs would make people think twice about moving,” said Andrew Scherer, a professor at New York Law School and author of Residential Landlord-Tenant Law in New York.
It “gums up the market,” Ingrid Gould Ellen, the director of the Furman Center for Real Estate and Urban Policy at New York University, told the New York Times about these expenses. “When a housing market is functioning well, there’s mobility.” And with less mobility, renters are often left to rely on the kindness of landlords, which in many cases can be hard to come by.
“When there are so many barriers preventing renters from moving to other homes, landlords can take advantage of that and continue to raise rents,” Saadian, of the National Low Income Housing Coalition, said.
Second, certain fees can have long-term consequences even after a lease is signed. These so-called hidden fees — like for trash collection or maintenance — often aren’t advertised, which can mislead applicants into thinking the rent is more affordable than it actually is.
“It makes it really tricky for people who are looking for housing because they see an advertised price and they think, ‘Oh good, this is within my budget,’” said Ariel Nelson, a staff attorney at the National Consumer Law Center (NCLC). But after adding up all the fees, some renters realize the cost is more than they had in mind. And some fees end up becoming recurring payments. That can cause renters to potentially fall behind on rent.
“What can happen is that these fees are part of what becomes rental debt and it could end up on their credit report as a debt collection item,” Nelson said. “We know that that is information that is then used to screen tenants when they’re looking for housing, and if you have debt that’s owed to a former landlord, that’s often an automatic denial from landlords.”
Lastly, fees and upfront costs can make it harder to find adequate housing for low-income renters in particular and allow landlords to get away with bad management.
“Landlords know they can get away with deferring maintenance on properties,” Saadian said. “So you might not see it only in terms of higher costs to renters, but that the options they have available to them are properties that are in poorer condition.”
What states can do to lower upfront costs
Last year, as part of the Biden administration’s broader crackdown on junk fees, the White House specifically pointed out some of the upfront costs renters face. “These fees are often more than the actual cost of providing the service, or are added onto rents to cover services that renters assume are included — or that they don’t even want,” the White House said in a press release. The Biden administration went on to highlight and support legislative efforts to lower these costs in various states.
In Colorado, for example, lawmakers passed a bill that would allow people to pay only one application fee over a 30-day period so that they can apply to multiple places without incurring burdensome charges. Rhode Island imposed a cap on application fees earlier this year that limits them to the actual cost of running a background and credit check. And in Montana, lawmakers sought to require landlords to issue a refund to unsuccessful applicants.
Those might seem like relatively small gestures, but they make a difference for many renters, and they help prevent landlords — particularly large corporate landlords — from taking advantage of tenants. According to a report from the NCLC, for example, landlords sometimes charge applicants an application fee even if they know that the applicant doesn’t have a chance of getting approved. Enacting laws like those in Colorado or Rhode Island — or better yet, following the lead of Vermont, which prohibits landlords from charging application fees altogether — would go a long way toward putting an end to those kinds of predatory practices.
Some more local jurisdictions also provide good models for states to emulate. Olympia, Washington, for example, requires landlords to be transparent about any fees they plan to charge prospective tenants before someone applies, and bans the practice of charging fees for expenses that landlords already anticipate, like certain building maintenance and upkeep.
Efforts to reduce move-in costs for renters shouldn’t just focus on junk fees. The need to pay the first month’s rent along with a security deposit can be unnecessarily prohibitive. That’s why efforts to allow lower-income renters to pay a security deposit in installments rather than a single payment can make a difference for a renter looking to move to a new home.
While those policy fixes help make moving more affordable, there are more ambitious steps states can take to help those who are most in need.
In 2011, Massachusetts established HomeBASE, a program that helps struggling residents sign a lease not only by subsidizing rent for up to three years, but also by covering these burdensome costs, including first and last month’s rent, security deposits, and broker fees. The program even helps residents pay for new furniture and moving expenses.
The funds that HomeBASE provides are often critical. “It’s allowing families to, in a lot of cases, exit shelters quickly or avoid shelters at all costs,” said Felisha Marshall, director of housing supports at Metro Housing Boston, a nonprofit that works on homelessness prevention and administers government programs like HomeBASE.
To be sure, addressing these fees and upfront costs that renters have to pay is a drop in the bucket when it comes to the broader effort to lower housing costs, especially because they are mostly just a patchwork of tenant protections. But when it comes to making housing more affordable, every little bit helps. Just ask anyone who’s ever had to move.
