While the rent is too darn high for many Texas renters, a new report points to another factor driving up housing costs: Junk fees.
The report, released by the University of Texas at Austin School of Law, details charges added to a tenant’s bill on top of rent, which are often hidden or exceed the actual cost of the services they provide.
“Junk fees are charges for mandatory services that tenants can't opt out of, and they're tacked onto their rent,” UT law professor Heather Way said. “Valet trash fees, monthly pest-control fees, those are the two most common types of fees we've seen, but then you have things like administrative billing fees, utility administration fee, facilities fee. We've even seen boiler management fees, fire hydrant fees, the list, it goes on and on and it just gets out of control.”
Way said it’s hard to calculate exactly how much renters are paying in fees, because the information is not well-tracked. She said Austin renters may be paying more of them as landlords seek to increase revenues while keeping the listed rent price competitive in a market that has more market-rate rental housing than it needs. But the practice has been documented across the country and drawn the scrutiny of the Biden Administration.
“Right now, what we have is anecdotal evidence of this but what we’ve heard is that this is a trend that’s very common in larger apartment complexes where you have corporate landlords,” Way said. “I think it’s no surprise that as we see more Wall Street investment in our apartment market, we’re seeing a rise in these fees.”
Many of these fees are recurring fees charged monthly. In some cases, tenants are automatically charged for a service that is optional until they opt out, like cable TV, the report said.
“One of the big problems is that these fees are not typically disclosed in the listing price of the unit, so it prevents comparison shopping,” Way said.
She said tenants often don’t discover the true cost of an apartment until after they’ve paid application fees, which can cost hundreds of dollars, or committed to a one-year lease, “and at that point, they’re stuck.”
The report also details one-time charges that add cost to renters, including application fees, processing fees, move-in fees, and high-risk fees charged to tenants with low credit scores or no rental history. And the report describes tenants being charged fees for arbitrarily applied violations of vague community rules, or repair charges that are excessive or fix things tenants shouldn’t have to pay for, like storm damage.
Pet owners face additional burden, often paying several hundred dollars for a non-refundable pet deposit in addition to a monthly pet fee. In one building detailed in the report, pet fees alone can add $1,800 to the housing bill.
Way said the research was led by students in the law school’s housing clinic and the tenant-organizing group BASTA after the group’s members raised alarms about the growing burden.
“They’ve just been seeing over the past couple years a big surge in hidden and excessive charges that tenants are getting hit with. And the renters that they work with, this has been really jeopardizing their financial security.”
Rents have grown in Texas to outpace more and more tenants’ ability to pay. A recent Harvard University study found 2.1 million renter households in the state — more than half of all renters — are paying more for rent than they can afford. Another study found Texas’ poorest renters face a shortage of 679,000 units they can afford.
“A lot of these are services that typically just used to be included in the rent, and now they’re being tacked on — on top of the rent,” Way said.
Take valet trash fees, Way said. When she asks her students and others what fees they’re paying, it seems like most are being charged for valet trash. Exactly what that pays for, though, is not as consistent. While it may have started as a high-end option allowing tenants to put their trash outside their door and have it collected and disposed of, Way said she now sees it being charged to every tenant, even in buildings with trash chutes and dumpsters that require tenants to toss out their own garbage.
The Biden Administration last year raised concerns about fees charged to renters that drive up housing costs and go beyond covering the costs of services being provided by management companies. It's part of a wider effort from the administration to rein in what it calls junk fees across industries, despite pushback from industry lobbies.
In a letter to landlords, U.S. Housing and Urban Development Secretary Marcia Fudge called on housing providers and state and local leaders to reduce the burden of fees on renters, and to increase transparency about additional fees so renters know the true cost of housing upfront.
“Many renters today face fees that are hidden, duplicative, or unnecessary as part of the housing search and leasing process. 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,” Fudge wrote.
The administration includes reining in burdensome fees in its blueprint for a Renter Bill of Rights to offer greater tenant protections, and the HUD secretary announced that three online rental platforms — Zillow, Apartments.com, and AffordableHousing.com — had agreed to include required fees in listings advertising rental homes.
The Federal Trade Commission proposed a rule last fall that would “prohibit unfair or deceptive practices relating to fees for goods or services, specifically, misrepresenting the total costs of goods and services by omitting mandatory fees from advertised prices and misrepresenting the nature and purpose of fees.” The rule, which has been delayed, would include rental fees. A virtual hearing is scheduled later this month.
The UT Austin report also points to solutions that can be done closer to home.
State lawmakers could pass laws making landlords disclose all fees in rental listings and clarify which are mandatory, Way said. They could also restrict fee amounts to the actual cost of providing a service, like changing the locks or running a background check on an applicant, or prohibit landlords from evicting tenants for unpaid fees or increasing fees mid-lease.
Local governments are more limited because lawmakers last year severely restricted city and county governments’ ability to address housing issues. However, cities could cover a small slice of the rental housing market by requiring properties getting tax credits or other subsidies to commit to greater fee transparency or limiting fees.
Got a tip? Christopher Connelly is KERA's One Crisis Away Reporter, exploring life on the financial edge. Email Christopher at cconnelly@kera.org.You can follow Christopher on Twitter @hithisischris.
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