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What are rental housing junk fees?

What are rental housing junk fees
by Brad Cartier, posted in Newsletter

Carl White of the Federal Reserve Bank of St. Louis writes about distress in the commercial real estate market, highlighting that rising rates, high inflation, recession concerns, and work-from-home have created serious concerns about the market and the loans that support it. White notes that although we are likely early in the distress, it’s important to remember that banks are much better capitalized now than during the Great Recession.

Joshua Oliver and Joshua Chaffin of the Financial Times join the conversation, noting that “a long-anticipated reckoning is under way in the US commercial property industry.” For instance, according to recent sales price data,  there has already been a loss of $76bn in office value in New York City.

According to the National Association of Realtors (NAR), commercial real estate relies heavily on small banks for loans, and the ongoing pullback in lending will be detrimental to the sector. This will give rise to borrowers seeking out smaller alternative lenders in the short term. That said, NAR notes that delinquency rates among all commercial assets are still well below 1%.

Delinquency rates still low

Source: NAR (July 2023)

Alena Bostros of Fortune reports on a Morgan Stanley report which forecasts that commercial real estate will crash harder than in 2008, which was more isolated to residential real estate and credit.

Given the anticipated pain ahead for this sector, Benjamin Bain of Bloomberg reports that U.S. bank regulators have issued guidance asking lenders to work more collaboratively with commercial borrowers during these tough economic times. “The new guidance recommends that banks grant short-term loan accommodations, which include agreeing to defer payments, accepting partial ones, or providing other assistance.”

Finally, Matt Tracy of Reuters reports that given the exposure to increasingly distressed commercial loans, most banks are increasing their cash reserves to absorb forthcoming losses.

Junk fees

According to a White House press release: “Today, President Biden is announcing a new front in his crackdown on junk fees: rental housing. From repeated rental application fees to surprise “convenience fees,” millions of families incur burdensome costs in the rental application process and throughout the duration of their lease. These fees are often more than the actual cost of providing the service, or are added onto rents to cover services that renters assume are included—or that they don’t even want.”

Patrick Hauf of Fox News reports on this announcement, highlighting that Zillow,, and will provide more upfront cost information on rental properties, including fees such as applications, online payments, mail sorting, and trash.

More specifically, Christine Serlin of MFE states that “Zillow will be launching a Cost of Renting Summary on its active apartment listings, and will unveil a calculator on its platform that will help renters determine the all-in price of a unit. The nation’s largest online platform for affordable housing, will require owners to disclose all refundable and nonrefundable fees and charges upfront in their listings.”

Maddy McCarty of Bisnow reports on the junk fee proposal, highlighting that the recommendation is to cap or eliminate application fees and allow renters to supply their screening reports. 

The National Multifamily Housing Council (NMHC) quickly released a statement in response to the White House announcement on rental fees: 

“While we support the voluntary initiatives included in the White House’s announcement today, we strongly disagree with the characterization that rental housing residents are pervasively being taken advantage of by housing providers. We are aware of no credible evidence to support this assumption. If there are bad actors who are taking advantage of prospective residents, they should be dealt with through appropriate legal channels.”

Supply update

Dana Anderson of Redfin reports on the lack of housing supply, with housing prices increasing as buyer competition heats up. “The typical U.S. home sold for $382,500 during the four weeks ending July 16, up 2.1% from a year earlier. That’s the biggest increase since December 2022 and the second straight price uptick after nearly five months of declines.” Listings are down an astonishing 25% yearly as rising rates keep would-be sellers off the market.

Homes for sale decreasing

Source: Redfin (July 2023)

Nicole Bachaud of Zillow reports on supply data, noting that 4.16 million homes were sold in June 2023, down 3.3% from May and another 18.9% year-over-year. Total housing inventory at the end of June sat at 1 million units, totaling only 3.1 months of supply.

“Existing home sales will continue to remain suppressed while both sides of this market are feeling the heat of affordability constraints, and we will likely continue to see buyers turning their eyes towards the new construction market – which can offer incentives to tip the scales in favor of buyers budgets as well as offer more available inventory.”

Ben Verde of Inman reports on the above data, highlighting that supply is now at a 14-year low. This has sent prices higher, with the median sales price increasing to $410,000, or only 0.9% below the highest price recorded by NAR. 

Despite this, regional differences exist according to Danielle Hale of, with conditions in the Northeast and Midwest remaining relatively positive. “June sales in these areas were flat or higher (+0.0% in the Midwest and +2.0% in the Northeast). Furthermore, home prices continued to increase in both the Northeast (+4.9%) and the Midwest (+2.1%) even as they ease in the South (-1.2%) and West (-3.4%). This is why home shoppers and sellers should consider not only the national context, but how these trends are playing out locally, which can be quite different from market to market.”

Existing home sales drop

Source: (July 2023)

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