States Are Demanding Multifamily Fee Disclosure. Will Landlords Comply Or Do It 'Kicking And Screaming'?

When rental housing was left out of the Federal Trade Commission’s final rule on junk fees, it didn't mean multifamily operators were totally off the hook.

An increasing number of cities and states are now requiring the disclosure of all fees to prospective tenants, sometimes before the application process even begins.

Some in the industry are pushing back hard. But others are taking new state and municipal rules as a signal of how regulation is moving, working to implement transparency of fees for services like trash collection, pets and pest control across their nationwide portfolios.

Proponents of regulation say full disclosure is good for consumers and businesses, adding that the industry is moving this direction whether operators like it or not. 

Others say they are all for transparency, but regulations can be taken too far. Price fluctuation can make upfront fee disclosure complicated and even artificially inflate the price of a rental in some cases, confusing consumers and disrupting business, said Nicole Upano, associate vice president of housing policy and regulatory affairs for the National Apartment Association, a trade group for multifamily owners and operators.

“Our concern when it comes to disclosure requirements is when they're at the point of advertising or prior to the lease being signed, because at that point, that's still a negotiating process,” Upano said.

“You're still trying to understand what their tenancy will look like, if they'll have a pet, if they'll require any other needs as part of their tenancy,” she added. “So requiring a sort of blanket total price, which is what the FTC had prescribed across industries, that's of great concern to us.” 

That is the argument the NAA and the National Multifamily Housing Council made during the FTC’s rulemaking process: Rental housing isn't based on a single-point transaction like buying a hotel room or a ticket to an event.

Both of those types of purchases are included in the FTC’s final rule requiring businesses to display the total price more prominently than most other pricing information. 

The industry norm is to detail all fees within a lease agreement, Upano said. But some states, like Minnesota, are now requiring apartment communities to disclose all nonoptional fees on the first page of a lease agreement and anywhere the apartment listing is advertised. 

Nearly a dozen other state legislatures passed or introduced bills last year banning rental housing fees or requiring their disclosure, Multifamily Dive reported. Virginia is requiring landlords to disclose all rents and fees on the first page of a lease agreement, and Maine is requiring apartment owners to disclose the full cost of housing, inclusive of fees, before tenancy begins. 

Action is happening at the city level, too. Fayetteville, Arkansas, has mandated comprehensive disclosure of all fees and costs likely to be charged to a tenant prior to the potential renter paying an application or background check fee. 

Austin City Council voted on a resolution in October to require landlords to divulge monthly and one-time fees. It tasked city staff with creating a final rule to vote on this summer. 

Stacy Hunt, a Houston-based executive director for Greystar’s U.S. property management business, said at a Bisnow event last month that more states are requiring the company to publish fee schedules and estimated costs for services like water and sewer.

While Hunt said it is unclear how quickly this kind of regulation will become a national standard, Greystar is seemingly preparing its portfolio with guides of required, optional and per-occurrence fees on property websites.

“I can tell you from experience, it’s not easy,” Hunt said at the event. “You’re going to have to link together your website. You’re going to have to link together your [software]. The technology necessary to do that is expensive. It’s intricate, and it’s time-consuming.” 

Greystar has taken measures to increase transparency, it told the Houston Chronicle in a statement regarding a lawsuit it is facing from the FTC and Colorado’s attorney general. Greystar has moved to dismiss the federal lawsuit, which accused it of not disclosing fees until after a tenant signed a lease. Greystar has said the suit is “based on gross misrepresentations of the facts.” 

NAA and its members support and encourage transparency and equal opportunity, Upano said. But disclosure requirements vary widely between states and cities, complicating compliance. Third-party rental sites also might not be set up to comply with regional requirements.

“There are services across the country that offer rentals or present them to the general public,” she said. “We have heard between housing providers and the third-party providers that are services to renters, it’s not always practically feasible to move forward with these disclosure requirements.” 

But proponents of transparency argue that it shouldn’t be hard. Heather Way, director of the Housing Policy Clinic at The University of Texas School of Law, said Zillow and other apartment listing sites already include fee listings as a feature of their websites. 

The Housing Policy Clinic published a report about combatting junk fees in rental housing last year, arguing policymakers can increase transparency by requiring landlords to inform applicants of all mandatory recurring fees when advertising rental prices.

“In terms of requiring disclosure of mandatory recurring fees with rents, it's very easy for a landlord to do,” Way said by email. “It means listing the total monthly cost of leasing a unit in advertisements, inclusive of rent and fees, rather than just the ‘base rent.’” 

The concept can be overwhelming for apartment operators that haven’t thought about tailoring their systems for disclosure or those that have never tracked fees in an accurate way, said Blerim Zeqiri, CEO and founder of Radix, a multifamily data and software company.

Zeqiri said Radix’s RealRents, a platform built to offer transparency in rental housing searches and update market fluctuations in real time, can help solve that problem.

Radix is working with several major operators interested in using RealRents, which promises to eliminate the manpower needed to update every fee for each applicant, Zeqiri said. For example, if rent increases with the market, RealRents will automatically adjust a property’s security deposit based on the operator’s desired proportion of rent.

“When you go to that property, that person who's there, they will pull some paper, they will calculate it for you or whatever,” he said. “But the operators never built the back-end systems to [offer that information].” 

Zeqiri said all industries are moving toward displaying full costs upfront due to consumer demand. It is a better business practice for consumers, who can evaluate whether an apartment is affordable before they engage. It also helps operators get better leads on potential renters, he said. 

Transparency helps operators standardize and optimize fees and rents throughout their portfolio, Zeqiri said. Also, it can keep them compliant.

“The minute this becomes law, all the plaintiffs' attorneys are going to be roaming websites and finding class-action lawsuits,” Zeqiri said, adding this is already happening in places like Minnesota, where owners were sued for collecting fees not discussed in lease agreements. 

But rental housing is already one of the most regulated industries, and properties must comply with a variety of federal, state and local laws, Upano said, adding that consumer protection laws most commonly require disclosure of a base rent price.

NAA is always watching for policy landscape changes, and it is concerned about any arbitrary caps on rent or fees that wouldn’t allow housing providers to realign as costs and expenses change.

Colorado, for one, has limited security deposits for pets to a maximum of $300. 

“There’s an imbalance there when fee disclosure requirements say … ‘If you don’t disclose it properly, you can’t charge the fee,’” Upano said. “There’s always the chance that circumstances change, and certain triggers may not have happened or may never happen.” 

That could include a bad check fee, she said. That may never apply to a tenant, but including all potential fees in an advertisement could artificially inflate the price of a rental property when compared to competitors.

Some requirements can even make fee and rental housing costs less clear, Upano said.

Upano rejected arguments asserting that fees are tantamount to a bait and switch.

“All fees and rental housing costs that the tenant can expect to pay while they're living at a particular community, those are always in the lease,” she said.

But Zeqiri said fuller disclosure is in high demand. The first major landlords to implement transparency will earn brand loyalty, like Uber did over the taxi industry, he said. 

“The industry is missing the bigger point, which is not ‘I need to do this kicking and screaming because someone is going to sue me or the government is going to ask me to do it,’” Zeqiri said. “It’s that you inspire people to trust you when you say, ‘Hey, here’s how much all of the things are going to cost you to be here.’” 

CORRECTION, JULY 17, 9 A.M. CT: A previous version of this story included an incorrect title for the NAA’s Nicole Upano. The article has been updated.