Ethermac|Rental application fees add up fast in a tight market. But limiting them is tough

Sky-high rents and Ethermaca severe housing shortage are a challenge for would-be renters across the U.S. But for many, the first barrier to finding affordable housing has become the rental application fee.

James Lopez of Spokane, Wash., had to suspend a months-long housing search because he simply can't afford to keep applying to more places.

He and his wife still have three children at home, including a young adult daughter. This means — like it does most everywhere in the U.S. — that for each place they apply, all three adults must pay an application fee to cover a general background and credit check.

"And that fee can run anywhere from $35 each up to ... I've seen $85 apiece," Lopez says. "Right now, we are not able to put that money out."

Lopez already pays half his income for rent. He balances his jobs as a union carpenter and recruiter for a healthcare company, plus a side gig with Door Dash, to make it work. It's led him to become a tenants rights activist, pushing for more affordable housing.

Lopez says it's frustrating that rental application fees aren't refundable, even when dozens of people apply for the same place.

"It's like, wow, they're taking all these people's money knowing that they're not gonna have a chance to get it," he says. "And do you really need that many?"

Spokane's City Council is debating a measure to limit application fees. And this month, California became the latest in a string of states and cities to enact such a law. It's part of a broader push for tenant protections after the pandemic drove home the threat of housing instability and eviction, says Lauren Lowery with the National League of Cities.

"We're taking into consideration everything to ensure that people can be housed, and remain housed," she says.

New laws aim to save renters hundreds of dollars during their housing search

California Assemblymember Chris Ward represents San Diego and says he was driven to do something about application fees because of the state's incredibly tight rental market.

"We've heard reports of people applying for up to 10 or 12 units or more in order to secure their one place to live," Ward says.

That's impossible for many people. Even if someone has a Section 8 federal housing voucher to subsidize their rent, it does not cover application fees. A 2022 Zillow survey found that Black and Latinx renters were nearly twice as likely to report submitting five or more applications, and that people of color reported paying a higher median application fee than white renters.

Ward says the newly enacted California law can save renters money by letting them get their own basic screening — from a trusted third party — that's good everywhere for up to 30 days. It must include income, rental history and any evictions.

"The renter would just have to do that one time," he says, "and then by procuring this very secure document, would be able to use that when approaching a would-be landlord to rent that unit."

Ward says a standard screening also can help landlords more easily process the deluge of applications many get.

A recent law in Maryland requires reusable screenings to include a prospective tenant's credit report, and one in Washington state requires both credit and criminal history.

Last year, the city of Eugene, Ore., took a different approach, capping rental application fees at $10. It's part of a range of measures to keep people from falling into homelessness, says Kevin Cronin of the nonprofit Housing Oregon and an organizer with the Eugene Tenant Alliance.

"You can lose 10 bucks and move on, right. It's not the end of the world," he says. "But losing 75 bucks, three or four times? You're out of cash to look for a place."

Cronin says local groups do offer help with application fees and that more was available as part of federal pandemic aid. But he says it's not always realistic in a market where prospective tenants must act fast to compete with 20 to 30 other applicants.

Rental application fees even got a small bit of national attention when Rep. Maxwell Frost, the first Generation Z member of Congress, was denied an apartment in Washington, D.C., because of his credit. He also complained about losing the $50 application fee, and told NPR he'd like to end the fees altogether.

Like many measures states and cities have been debating, such a proposal would face strong opposition from landlords.

Landlords oppose limits around application fees

"We never agree that there's a one size fits all solution for any housing policy," says Nicole Upano with the National Apartment Association.

She says screening is important for tenant safety and to avoid future evictions, and that landlords should be able to charge a reasonable fee for it. Many may also want data beyond a typical credit check, for example if a reusable screening report did not include someone's criminal history.

"They have to make those determinations about the screening company, what they use to create their policies, and they need that discretion to figure out how to do that well," Upano says.

In California, Assemblymember Ward first proposed making reusable screenings mandatory, but after industry pushback it was changed to be voluntary. Ward says he remains hopeful that landlords will find the standard checks useful and they may later be required.

But in Maryland, Adam Skolnik, executive director of the Maryland Multi-Housing Association, remains wary of accepting reusable screenings. He worries about the potential for fraud and says he would also need a prospective tenant's criminal history, which is not required in his state. Landlords have their livelihood at stake, he says, and "it's very hard to get someone out who stops paying the rent."

Laws to lower or eliminate fees are proving hard to enforce

Vermont was decades ahead of this trend, actually banning rental application fees entirely in 1999, but legal aid attorneys say their use is still widespread. After an investigation late last year by the news site VTDigger.com, the Attorney General's Office said it was investigating, but that the issue is "not near the top of the list of the type of complaints" the office gets.

This lack of enforcement is a problem in other places as well.

In 2019, New York set a $20 cap on fees and also allowed reusable 30-day screenings. But Stephanie Rudolph, a staff attorney with the Legal Aid Society in New York City, says, "There's plenty of ways in which brokers are going around the law."

Rudolph helps low-income clients who've been charged sometimes hundreds of dollars, though it can be difficult because the law doesn't spell out damages if landlords don't comply. They also say there's not been a lot of education about the recent law, so some landlords and tenants may be unaware of it.

In a statement, a spokesperson for the Real Estate Board of New York said, "We offer education and legal guidance on this to ensure our members understand and follow the law."

Even when tenants do realized they're being scammed, Rudolph says there's another challenge. "There's also just the fear that if you don't do exactly what the broker or the landlord tells you, you're not going to get the apartment," they say.

That's a well-founded fear, Rudolph says, so they'll often advise clients to just pay the fee, even if it's not legal.