Two new laws in Bellingham aim to end excessive and unreasonable “junk fees” from being charged to renters in apartments, houses and manufactured home parks.
A $750 “new roommate fee.” A $270 application fee. A $50 “move-out cleaning” fee. A $200 “lease transfer fee.” These are the types of charges that tenant advocates call “junk fees,” which can refer to anything from monthly pet fees to parking fees. They argue that the use of these fees has expanded in recent years as landlords seek alternative ways to raise profits without directly raising the rent itself.
“This is really a growing trend,” said Bellingham Councilmember Jace Cotton, who sponsored the laws. “Made-up fees, and existing fees becoming more extreme. The variety of impacts that has on young people and working families and retirees can be quite significant.”
Several Washington cities have taken steps to limit certain types of rental fees in recent years, but Bellingham’s two new laws appear to be among the most comprehensive regulations passed to date.
The Bellingham Council passed two laws: one focused on rentals and one on manufactured homeowners. The new rental law sets limits on several types of common charges. It caps screening fees at $50; security deposits at one month’s rent; pet damage deposits at no more than 30% of one month’s rent; and late fees at no more than 2% of the portion of outstanding monthly rent owed by the tenant.
In addition to capping many fees, the law also fully prohibits landlords from charging tenants fees for the use of in-unit appliances; access to common areas; payment processing mail and package collection; adding a new tenant to the lease; and the performance of any normal landlord duties. The manufactured home law has similar provisions for park leases.
Both laws also have transparency provisions that require upfront disclosure of fees, so tenants know what they’re getting into when looking for a new lease.
“This is going to make a significant contribution to increasing housing access and protecting people from the worst excesses of exploitation,” Cotton said.
The new laws, which the Bellingham City Council passed last month, are the result of months of community outreach, surveys and listening sessions with landlords and tenants in the city. Some landlords have argued that the new laws will cut into thin profit margins and discourage new housing investment. Cotton and other supporters say the laws represent a good compromise, and will bring fairness into the rental market.
Like many West Coast cities, Bellingham is grappling with an intense housing shortage. More than half of renters there are considered cost-burdened, spending more than 30% of their monthly income on rent.
“You’ve got a restricted supply, and tenants are scrambling,” said Perry Eskridge, government affairs director for the Whatcom County Realtors, which represents many local landlords. “They feel like they have no bargaining power.”
Eskridge said the landlords his group represents were largely in agreement with the city concerning bill transparency. Making sure tenants and landlords are on the same page about fees associated with a lease is important, he said.
But landlords aren’t happy about the restrictions on fees, Eskridge said.
“All of a sudden the City Council is dictating what can and can’t be in a private contract,” Eskridge said.
'Nickeled and dimed'
Cotton is a renter himself, but said he’s mostly rented from smaller landlords and hasn’t had problems with unreasonable junk fees.
The issue came to his attention during a meeting with tenants last year. When someone brought up unfair fees, “The room filled really quickly with a lot of different stories that clued me in to the fact that this is a bigger issue than had been my experience,” he said.
Cotton introduced his two proposed junk fees bills last September. At a Council meeting that month, a crowd of renters turned out to testify about costly fees they’d been forced to pay on top of their monthly rent: a $500 administrative fee, a $125 monthly pet fee, a mandatory $45-a-month “tenants benefits package” and a $100 “parking setup fee” that was followed by a $25 monthly “parking fee.”
“Being nickeled and dimed can be an extremely infuriating and demoralizing experience,” Cotton said.
Many of the commenters described being surprised to learn that they would be charged those additional fees. Cotton said landlords often don’t disclose the fees in an effort to make listings appear more competitive and make the price of rent seem lower than it actually is.
Even when the fees are minor — a surprise $12 a month payment processing fee, for example — they can still wear people down and bring tenants a sense of “moral injury,” said Nate Christiansen, a Bellingham attorney who works with low-income tenants.
“Fundamentally, this speaks to a basic sense of fairness,” Christiansen said.
Christiansen also is a renter. He noted that, despite being an expert in housing law, he often feels powerless and unable to negotiate when signing leases in Bellingham. You’re forced to take whatever you can get, he said.
“It can feel as if you’re just at the mercy of forces beyond your control,” Christiansen said. “That can erode people’s feeling of belonging in a community.”
Eskridge of the Whatcom County Realtors agrees that a few of the fee types prohibited in the bill — such as fees for the use of in-unit appliances, access to common areas or “garbage concierge services” — are ridiculous and classifiable as “junk” fees. But he said he isn’t aware of any landlords in Bellingham who were charging those types of fees.
He argued that other types of fees — like pet fees, lease transfer fees and payment processing fees — are important for landlords who are taking a risk on their investment. “A lot of people are unaware of how much damage a pet can do,” he said, adding that the fees help landlords ensure tenants are meeting the obligations outlined in their contracts.
“Net operating income includes things like fees,” Eskridge said. “Nobody gets into an investment so they can subsidize people, they’re in it because they want some sort of return for the risk they’re taking.”
Bellingham has low vacancy rates. When housing demand outpaces supply, Eskridge said, there are two possible outcomes: “Either rents have to go up or landlords, I hate to say it, start getting creative about how to increase their profit margin.”
Eskridge worries the regulations will stifle desperately needed housing development.
“Bellingham now is probably one of the most highly regulated rental markets in the state,” he said. “That’s not necessarily a conducive environment for additional investment.”
Cotton said he thinks the final bill represents a good compromise that is fair to landlords and tenants.
Landlords might just raise rent to make up the lost profit from fees, Eskridge said. Cleveland Harris, an organizer with Community First Whatcom who helped advocate for the bills, acknowledged that that’s a possibility, but said it would still be an improvement over the current system.
“If we annualize some of these fees over the year, they could be, like, two to five dollars a month,” Harris said. “If that’s the kind of rental increases folks see, maybe folks could absorb some of those. But I think if we see hundreds of dollars in rent increases based on this, it might not be in good faith.”
'A fundamental disparity'
The Bellingham City Council deferred Cotton’s ordinances after he introduced them in September, citing a need for more research and input. Harris helped with tenant outreach.
“There was a general sense that people had been experiencing various fees that they didn’t think were fair,” Harris said. “People just wish that all these fees were just included in rent so they could appropriately understand.”
Advocates are hoping to build on the momentum in Bellingham by passing similar junk-fees laws in the nearby city of Ferndale, Harris said. Community First Whatcom recently gathered enough signatures to run the proposal as a ballot initiative.
There have been several unsuccessful efforts in the Washington state legislature to regulate rental junk fees. Some Washington cities — including Seattle, Auburn, Aberdeen, Burien, Olympia, SeaTac and Tacoma — have passed laws limiting some types of rental fees. Cotton said Bellingham’s new junk-fees laws seem to represent the “biggest bite of the apple so far,” but that they couldn’t have happened without building on the prior work of other cities.
“In the absence of comprehensive state legislation in this area, all of us as local jurisdictions are trying to be innovative and legislate with care,” Cotton said.
In the original bill Cotton introduced in September, the city of Bellingham would have handled enforcement against any landlords who violated the fee restrictions. The city-enforcement stipulation was later removed, Cotton said, because of concern about lack of city staff capacity.
The version signed into law has a private right-of-action clause, meaning tenants who believe their landlord violated the law would have to sue for relief. Cotton said he’s cautiously optimistic that compliance will be strong, but acknowledged that many tenants don’t have the legal resources to sue their landlords if the law isn’t followed. A few organizations already provide legal aid to tenants, and he’s interested in finding more ways for the city to support them.
The law does include a section that says a landlord’s violation of the fee law can be used as a legal defense for a tenant facing eviction because of nonpayment. Christensen, the Bellingham attorney, hopes that will provide “serious business incentive” for landlords to comply.
The junk-fees laws are a good step, Cotton said, but they won’t solve Bellingham’s fundamental problem of housing unaffordability. The housing shortage is an “indictment of decades of poor urban planning that has not allowed us to build the number of homes we need,” Cotton said, and more work is needed.
