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Earlier this month, HUD Secretary Marcia Fudge issued guidance to landlords, rental platforms, housing counselors, and state and local governments, on limiting excessive junk fees in rental markets.
On Tuesday, the White House held a panel discussion to make the economic case for President Biden’s junk fees initiative, which has been growing in prominence in the administration’s agenda. New National Economic Council director Lael Brainard, in opening remarks, explained how junk fees hurt more honest businesses that don’t bury excess charges in the fine print, and harm competition in the marketplace.
Brainard also noted that “junk fees hit the most vulnerable Americans the hardest.” Yet she went on to primarily discuss the fees imposed on travel and entertainment services—things that disproportionately affect the middle and upper classes. Laura Dooley, a lobbyist for StubHub, was a featured panelist, and fees on concert tickets a central preoccupation, along with airline tickets.
But among the representatives from 16 federal agencies who were in the audience were members of the Department of Housing and Urban Development (HUD), who for the past month have been engaged on fees that really do target vulnerable Americans, namely, renters.
Earlier this month, HUD Secretary Marcia Fudge issued a short guidance to landlords, rental platforms, housing counselors, and state and local governments, on a set of principles for eliminating and limiting junk fees in rental markets. As I have reported, rental fees have exploded at every stage of the process—stacking onto virtually every aspect of a monthly payment, from application fees, to fees tacked onto the rental price, to fees because it’s January.
Advocates have said that these fees align with the Federal Trade Commission’s working definition of junk fees as unnecessary, duplicative, and surprising. HUD’s interest came out of its work on the White House competition council, an offshoot of the Biden executive order on competition where much of the junk fee work has been developed.
Notably, the White House’s companion report to the panel discussion, with five illustrative examples of deceptive pricing schemes, included a section on “mandatory apartment fees,” suggesting that the issue has moved toward the top of the junk fee agenda.
Fudge’s guidance focused heavily on nonrefundable application fees for prospective renters. She asked for companies to either eliminate rental fees or limit them to cover the actual costs of accessing background checks, while allowing one application fee to be sufficient across multiple applications on a rental platform, or multiple units owned by the same rental company. Fudge also wants “administrative” and other processing fees attached at the outset of the leasing process to be removed. Other ideas include ensuring a renter can actually rent the apartment before paying the application fee. (Landlords commonly charge application fees for rentals that are not really available.)
Finally, Fudge stressed the need for disclosure in rental advertisements, an all-in price that takes into account recurring costs for amenities like utilities, insurance, pets, pest control, trash removal, maintenance, mail sorting, or use of common areas, as well as convenience fees for online or other forms of payment. Agency officials I spoke with said that this would not be a substitute for legitimacy—improper fees can be disclosed too—but a baseline standard that can help renters make decisions. “Every renter should know the true costs of finding and staying in their home, and any fees charged to renters should be fair and transparent,” Fudge wrote.
HUD getting involved in the process is a real-world manifestation of the “whole-of-government” approach on competition policy.
HUD is in a somewhat difficult spot with delivering change on junk fees. It is not an oversight regulator for rental housing markets; states typically do more of the heavy lifting. The letter therefore operates more as a call to action, laying out some core principles.
Still, there are some ways HUD can crack down on junk fees. Under the Fair Housing Act, HUD can investigate discrimination of certain protected classes. A recent Zillow survey found that renters of color are typically more likely to be charged application fees and pay more for them.
In addition, HUD does have an associated role with some programs, like FHA-initiated loans on multifamily housing, or affordable-housing grants. In some cases, the agency has enforced requirements that renters must receive a written notice that they’ve been turned down for a rental unit. Prohibitions or limitations on fees could operate in the same manner.
One way that HUD could have an impact is through creating a templated rental agreement that would clearly show all-in costs on one easy-to-read page. Housing advocates have highlighted that the current template agreements, created mostly by corporate landlords, are long and burdensome and serve to hide fees and disclosures. This wouldn’t be a regulatory mandate, but would present a best practice, perhaps funneled through state apartment organizations. The Consumer Financial Protection Bureau (CFPB) has had success with a “Know Before You Owe” template for mortgage documents that contained a simple, at-a-glance look at all mortgage and closing fees.
The trick would be to put this together without unintentionally legitimizing sets of fees that renters shouldn’t have to pay. But a standard rental contract could at least help would-be tenants compare which landlords are charging for pest control or trash removal, and which are not.
In her letter, Fudge also committed to sharing information with state and local governments. The White House earlier this month held an event with state legislators about exorbitant junk fees, and renter fees was one of the topics discussed. Some states do have strict caps on things like application fees.
HUD has also contributed to an interagency partnership with the CFPB, the Federal Housing Finance Agency, the Federal Trade Commission (FTC), and the Department of Agriculture about tenant screening reports. In particular, HUD has expressed concern with background checks that contain inaccurate information but continue to be used in screening, wasting a prospective renter’s money on fees for housing that they cannot obtain. Granting tenants the right to contest erroneous items on background checks is a focus of the initiative.
The National Consumer Law Center just last week released a report on rental junk fees, an extension of the lengthy public comment released to the FTC as it looks into junk fees more broadly.
HUD getting involved in the process is a real-world manifestation of the “whole-of-government” approach on competition policy, where agencies without much prior relationship to consumer protection or corporate abuse of market power get involved at policing the issue in their particular area. One of the reasons this has lain dormant for so long is that there sometimes are not clear lines of authority. But the presidential bully pulpit does matter, and HUD’s engagement reflects that recognition.
