No one likes having to search for a new apartment. Not only do we have a housing crisis in which prices are skyrocketing, but often the initial cost comes with many more hidden surcharges: the first month’s rent, a security deposit, and often a sneaky application fee. Although it supposedly covers administrative costs, this fee has become an almost insurmountable barrier to entry for many low-income families.
There seems to be less and less rental housing available, so we have to submit more applications. This has created a situation where potential tenants have to spend hundreds of dollars just to be considered as a possible renter. Fortunately, Philadelphia’s new law known as the “Move-In Affordability Plan” has gone into effect to curb these types of fees. From now on, there will be a strict limit of $50 maximum for apartment applications in the rental market.
Outrageous apartment application fees
If you’ve never had to look for an apartment, it may seem strange to you, but you have to send in a formal application to get approval for a rental. It’s completely normal—at least in the United States—for a prospective tenant to pay this application fee in almost all rental markets. This payment is justified by the landlord’s (or property manager’s) need to screen the tenant. This generally includes a credit check to assess the applicant’s financial responsibilities, a criminal background check, and finally, the money covers the administrative costs of the staff who must verify all this information and contact previous landlords who have provided a letter of recommendation.
The most important thing to note is that these fees are non-refundable; whether the applicant is approved or rejected, the money allocated to the verification process is lost. And here’s the crux of the matter: the actual cost to a landlord of performing a credit and background check is barely over $15, $40 at most.
Without clear regulation, many landlords and large management companies began charging excessive and outright abusive fees.
There were even reports of cases where more than $200 was charged per applicant, a figure that far exceeds the actual administrative cost. This trend ended up creating a new source of extra income through which to make money at the expense of potential tenants. In a competitive market, a person may apply for three to five properties to secure a home, losing money with each rejection. This has led to families easily losing between $200 and $1,000 in fees and recoverables.
For people with limited resources or an imperfect credit history, this expense becomes a barrier to accessing housing.
New Philadelphia legislation to stop that
This is where Philadelphia’s new legislation comes in: it caps application fees at $50. Not only that, but the law stipulates that they can only charge the actual cost of screening. If this turns out to be less than $50, the price will also be lowered, eliminating any profit margin that makes it profitable to receive many rental applications.
The law also tackles the security deposit: if(for some reason) it requires more than a month’s rent. the tenant must have the option to pay the exceeding amout in three monthly payments—no added interest charged.
This significantly alleviates the enormous initial expense of moving—which often includes the first month, the last month, and a security deposit—amounting to thousands of dollars at the time of signing the contract. This legislation continues to seek to protect the interests of those households with limited financial resources, who are the most vulnerable renters.
Junk fees and other hidden costs
Application fees are just one small problem among all the junk fees found in the rental market. They are still mandatory charges that significantly influence a tenant’s monthly cost of living. Another glaring example is pet fees, which are often a triple charge. These pet fees usually include a refundable deposit, a non-refundable one-time fee, and an extra pet rent that adds $25 to $75 per pet each month.
Then there are service fees, a mandatory monthly expense for access to community amenities such as the gym or pool. It’s no wonder that Millenials and Gen Z ultimate—and almost impossible—dream is to own a home… at least they won’t have to deal with landlord’s specials, hidden fees, nor have to hide Tobby any time they have a home inspection. Who would have thought that getting a mortgage and starting a family would become a generation’s wildest fantasy?