lease-provisions

Part Two | Decoding Rental ‘Junk Fees’ | Insights from HUD’s Recent Research Brief on Rental Fees

Author: Kasee Godwin
Date: 07.26.2023

Decoding Rental ‘Junk Fees’ | Insights from HUD’s Recent Research Brief on Rental Fees

Welcome to the second installment of our decoding dental ‘junk fees’ series, where we delve into valuable insights from the Policy and Practice Publication by the U.S. Department of Housing and Urban Development (HUD) regarding rental ‘junk fees.’ These reports shed light on residents’ challenges during background checks and the burden of excessive charges. By drawing lessons from HUD’s findings, we can strive for fairer practices that promote a balanced housing market.

Understanding Background Checks and Application Fees

Background checks play a crucial role in the property management industry, serving as a vital tool for assessing rental applicants’ financial backgrounds and rental histories. Property managers rely on these checks to ensure they select reliable and financially responsible residents for their rental properties. By examining credit histories and rental track records, property managers aim to mitigate potential risks and maintain a stable and responsible resident base. These background checks are most often obtained during the rental application process and come with an upfront fee paid by the renter/applicant. 

While background checks safeguard property owners and managers, HUD’s reports shed light on the challenges they may pose to certain applicants. Individuals with less-than-perfect credit histories or previous rental issues may face difficulties in securing housing due to the emphasis placed on these checks. This raises concerns about equitable access to housing opportunities for all individuals, regardless of their financial history.

Additionally, the reports reveal the prevalence of upfront fees imposed on residents during the application and move-in process. Property managers often utilize these fees to cover administrative costs associated with processing rental applications and preparing the unit for new occupants. However, residents may perceive these fees as burdensome, as they can contribute significantly to upfront expenses during the already financially demanding process of moving.

Balancing the need for background checks and upfront fees with ensuring fair and accessible housing options remains a challenge for the property management industry. As we navigate evolving legislation and advocate for fair housing practices, it is essential for property managers to strike a balance that protects both their interests and the rights of prospective residents, fostering a rental landscape that benefits everyone involved.

The Impact of Rental ‘Junk Fees’ on Residents

HUD’s insights paint a vivid picture of the impact of ‘junk fees’ on residents. For many individuals and families, these additional charges are a significant obstacle in their quest for affordable and suitable housing. In some cases, prospective residents may even need help deciding whether to pursue housing options with excessive fees or continue searching, further prolonging their housing instability.

As upfront fees continue to rise, they widen the economic gap and make it challenging for lower-income residents to secure quality housing. This disparity underscores the need for actionable solutions that level the playing field and promote equal access to housing opportunities.

The Call for Transparent Fee Disclosures & Caps to Application Fees

HUD’s reports emphasize the importance of transparent fee disclosures to help residents make informed decisions during the application process. Requiring property managers to provide clear, itemized breakdowns of all fees upfront can empower residents to compare costs accurately. Such transparency fosters trust between residents and property managers, forging a more harmonious renting experience for all parties involved.

The report advocates for a cap or even the elimination of application fees, recognizing the financial burden these fees can place on prospective renters. Additionally, HUD proposes empowering renters to provide their own screening reports, giving them greater control over the process and potentially reducing costs. Moreover, the report recommends exploring options for a single screening report to cover multiple applicants, streamlining the application process and promoting affordability.

While background checks are legitimate in assessing a resident’s rental history, HUD’s insights also indicate the need for a more balanced approach. Property managers can explore alternative criteria for evaluating rental applicants, ensuring that credit histories are not the sole determining factor. Emphasizing factors like rental payment history and references can help create a more inclusive and equitable process.

Industry Perspectives: Multifamily Officials and the Push for Transparency

The HUD report’s proposals have elicited varying responses from the rental industry. While some multifamily officials support the call for transparency, others argue that application fees are already clearly disclosed to renters, ensuring transparency in the rental process. They assert that such fees cover the costs associated with applicant screening and processing, which is essential for maintaining a responsible and stable resident base.

However, the industry acknowledges that bad actors may take advantage of renters through excessive fees and misleading practices. Multifamily experts believe that dealing with these issues requires targeted measures to address specific instances of abuse rather than blanket restrictions that may limit property managers’ ability to cover operational expenses.

In light of the ongoing discussions, finding common ground between renter protection and industry viability remains a crucial challenge. Collaborative efforts between regulatory bodies, advocacy groups, and property managers will play a vital role in identifying solutions that ensure transparency, fairness, and affordability in the rental housing market.

Advocating for Fair Housing Practices

HUD’s reports have sparked discussions surrounding fair housing practices. Legislators argue that ‘junk fees’ and disproportionate background check reliance may contribute to housing inequality. Ongoing talks about comprehensive reforms aim to protect resident rights and uphold the principles of fair housing.

Various state representatives have considered the possibility of creating legislation to limit the scope of ‘junk fees’ and establish standards for reasonable charges, potentially leading to a more equitable renting experience. Collaborative efforts between regulatory bodies, advocacy groups, and property managers are essential in identifying and addressing these complex issues. The goal is to strike a balance that ensures fair treatment for residents and property managers while promoting an inclusive housing market.

Empowering Residents Through Education

Empowering residents with knowledge about their rights and options is vital in navigating the renting landscape. Education and awareness campaigns can inform residents about their rights under existing laws, empowering them to challenge unfair practices. Equipping residents with the tools to recognize and report ‘junk fees’ or discriminatory practices is essential in holding property managers accountable.

Moving Forward

The HUD’s Policy and Practice Publication has provided valuable insights into the challenges posed by ‘junk fees’ and background checks in the renting process. As we continue to navigate the path toward fair housing practices, it is crucial to heed the lessons offered by renter research and sentiment.

By prioritizing transparency, education, and collaboration, we can pave the way for a more equitable renting experience, where every resident has an equal chance to find a place they can call home.

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Kasee Godwin

Position: Director of Marketing
Social Networks

Kasee is the Director of Marketing for Qira. She has nearly 15 years of experience in the real estate marketing industry, including 10 years on the client side. In her spare time, she enjoys reading science fiction, exploring new wineries, and fostering Golden Retrievers.

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