Yuri Gripas/Abaca/Sipa USA via AP Images
President Joe Biden delivers remarks on protecting consumers from hidden junk fees, in the South Court Auditorium at the White House in Washington, June 15, 2023.
While I was on vacation last week, the second anniversary of the White House executive order on promoting competition in the U.S. economy was marked by the release of several important measures. By far the biggest was the long-awaited rollout of draft merger guidelines, intended to instruct the judiciary on when federal antitrust authorities will challenge proposed mergers. As Matt Stoller explains, this is a reversal of a 40-year elite hijacking of the plain meaning of antitrust law, which has led to damaging concentration of markets. While by themselves, the merger guidelines do not require judges to change their views, they do shape legal opinion. It’s unbelievable that simply writing down what the law says can be even a little controversial, but it’s actually revolutionary.
There were some additional announcements aimed at antitrust enforcement in agriculture. But the measure that most interested me was an expansion of the administration’s junk fee abolition agenda, finally bringing it outside of the more elite considerations of travel and entertainment tickets. Nobody should be ripped off, but I had highlighted in February the areas where corporations have locked in on populations beyond hotel and air travel consumers, starting with the growing incidence of junk fees in rental housing.
Renters must pay application fees to even be considered for housing, which usually far exceed the cost of running a credit and background check. If they succeed in securing an apartment, they face “convenience fees” for paying their rent online or by check, fees for renting month to month, fees for guests, fees for inspections and maintenance, fees for amenities like mail sorting and pest control and utilities and cable and insurance, “valet trash” fees for having someone take the trash from a renter’s front door to a nearby chute, and even “fees that are charged each January because it’s January,” as one advocate told me.
All of these fees were mentioned in my story five months ago; now, most of them are in the preamble to the Biden administration’s newly announced crackdown on these junk fees. “It’s simply not right, and we’re going to move on it,” President Biden said last Wednesday.
“Move on it” is probably an overstatement; the main change is some voluntary transparency and some research designed to catalyze a state-level movement to get these fees scrapped. Despite the modest nature of this, I do think it will make a difference, which isn’t easy for the federal government with an issue like housing that is generally localized.
The Prospect has been critical of other junk fee initiatives that offer voluntary “all-in” pricing, so consumers know what they’re going to pay up front. While this addresses the hidden nature of junk fees, in the context of obvious price-gouging schemes like Ticketmaster’s concert ticket play, it merely lets people know how much exploitation they’re getting into, without recourse to avoid the harm.
As larger platforms move to all-in pricing, it could spur the whole industry to follow suit.
Housing is a somewhat different market. Renters really do comparison shop when looking for a place to live. Some of that is based on the quality of the apartment, proximity to work, the quality of local schools and other neighborhood attractions. But price has a lot to do with it, given how big a share of an individual budget can go to rent.
It’s simply not possible to comparison shop when landlords layer on after-the-fact fees that raise the real cost. So the agreement by Zillow, Apartments.com, AffordableHousing.com, and other rental platforms to display the all-in price really does benefit consumers, who can judge one rental unit against another before signing a lease. This brings these platforms up to the level of the radicals at the Texas Apartment Association, which has a model lease agreement with all-in costs prominently displayed.
As larger platforms move to all-in pricing, it could spur the whole industry to follow suit. And once valet trash and online payment fees are exposed to the light of day, landlords who use them can gain a competitive advantage. It will also be easier to recognize collusion in rental markets, which will be useful for enforcement.
All-in pricing could also provide a more accurate picture of inflation. To a large degree, current inflation statistics have been driven by the cost of housing, which spiked amid the persistence of working from home. But there’s just no way to talk intelligently about housing costs without knowing all the costs, including the hidden fees. For all the talk of supply constraints, rental price increases in the U.S. are much higher than they should be given the supply fundamentals, according to Morgan Stanley research (h/t Sober Look). Junk fees could be driving that, and we’d know if they were fully disclosed.
But disclosure is not a substitute for eliminating these fees. Fortunately, since a White House convening of hundreds of state legislators to discuss junk fees in March, several states have already stepped up, particularly on the issue of application fees, which can add up to hundreds of dollars in up-front costs before signing a lease.
Colorado enacted a bill allowing renters to reuse rental applications for up to 30 days on multiple listings without incurring new fees; Rhode Island and Maine now limit application fees to the actual cost of a background check and credit report; Connecticut capped application fees at $50 and prohibited fees beyond screening. Several of these reforms are highlighted in HUD’s new research, citing several states that cap application fees and allow renters to provide their own screening reports rather than pay for multiple application fees at different units.
Minnesota is also mandating all-in pricing on the first page of the lease agreement, while a similar bill has passed the California Senate. That bill in California prohibits certain fees, as does a separate bill that caps the amount renters must give in a security deposit. Connecticut’s application fee cap also bans move-in and move-out fees, as well as late fees on utility payments. Colorado’s rental application reuse law also limits fees on “third-party services.”
Many of these new laws build on efforts the Department of Housing and Urban Development has taken to encourage crackdowns on rental housing junk fees since the administration’s rollout of the junk fee agenda at Biden’s State of the Union address. This is the “whole of government” policy approach in action, and I’m particularly gratified to see the rental housing issue rise to a presidential level, months after I noted blind spots in the agenda. And as these kinds of caps become standard in blue states, many legislators elsewhere will want them for their constituents as well.
Tenants are invariably the most forgotten segment of the population, overlooked in virtually all the federal subsidies for housing, and given virtually no help to deal with the crisis of evictions. There’s a lot more the government could be doing; a new Legal Services Corporation report finds that the total yearly cost of providing legal counsel to every renter facing eviction would be just $4.1 billion, a rounding error that Congress should work to pick up. But any national attention on an issue so typically below the radar as tenant price-gouging is welcome.
Alongside other efforts to root out junk fees on vulnerable populations, like the Consumer Financial Protection Bureau’s action against Bank of America earlier this month for running up non-sufficient fund fees, some balance is finally being brought to the junk fee problem, on the principle that nobody should be unnecessarily ripped off, whether they’re on vacation or just living their lives.
