Today Councilmember Kshama Sawant announced legislation that could provide renters with a much needed defense against initial price gouging when moving apartments.

The bill proposes to cap the combined total of security deposit and non-refundable move-in fees at the equivalent of one month’s rent. It prohibits the total amount of non-refundable move-in fees from exceeding ten percent of first month’s rent. The bill also requires landlords provide payment plans ranging up to six months to spread move-in costs over a greater amount of time, further lessening the financial shock of moving.

Sawant proposes to limit various move-in fees at one months rent and include a six month payment plan to make the cost of moving more manageable for the non-wealthy. (City of Seattle)
Sawant proposes to limit various move-in fees to one month’s rent and to provide six month payment plans to spread the burden and make the cost of moving more manageable. (Seattle City Council)

When crafting the bill, Sawant’s office consulted with the advocacy organization Washington CAN! and their members were a part of the photo op pictured above, which @SeattleCouncil tweeted out. As The Stranger reported, Washington CAN! conducted a survey that showed tenants felt a significant impact from move-in fees:

The biggest barrier to moving, a problem for 87 percent of respondents, is the burden of expensive up-front costs, including first and last months’ rent, a security deposit, and cleaning costs at move-in. Almost all respondents identified up-front costs as a barrier to moving, though it was particularly a problem for people of color, transgender/genderqueer people, older people, people who are disabled, and people paying with alternative sources of income. One hundred percent of Black and Native people, people over the age of 55, Section 8 voucher holders, and people paying with Social Security income, said they perceive up-front costs as a significant barrier to moving. These are groups of people most likely to have little to no wealth or savings, and limited expendable income.

If passed, the move-in fee law would join Sawant’s “Slumlord Law” (passed in June) in providing Seattle tenants greater protections under the law. These two laws are important but admittedly smaller skirmishes taking place on the larger battlefield of housing affordability in Seattle.

The biggest challenge tenants face in Seattle is rising rental prices, which definitely seems to be exacerbated by zoning which outlaws apartment development on the great majority of Seattle’s land. Hopefully we see some progress on that front, too, as we also watch the progress of this bill. The move-in bill’s backers expect to face opposition from the landlord lobby, just as they did in passing the Slumlord Law.

 

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Doug Trumm is the Publication Director at The Urbanist. He joined the exodus to Seattle in 2014, leaving behind his home state of Minnesota. Living on disputed land between Wallingford and Fremont, he is doing his best to improve both neighborhoods. He is a grad student at the Evans School of Public Policy and Governance and a marketing intern at King County Metro. His views are his own and do not represent his employer.

25 COMMENTS

  1. Sawant has balls, I’ll give her that (actually, she might…), but how are rental owners suppose to protect themselves if the renter decides not to pay come month #2? What if the renter decides to trash the place and you’re stuck attempting to evict someone that trashed the place, AND having to take out of pocket to fix the unit, assuming you can get the renter evicted? Sorry, if you can’t pay up at the beginning in a lump sum, please go find an apartment in another municipality that you can afford. Yes, your commute will be longer, but you are living within your means. These handouts to whiny renters just makes no sense.

    • Insurance covers tenant damage. Yes, you’ll have to pay your deductible and yes, probably not everything will be covered.

      Landlords are running a business that provides an essential service. That service has to work for everyone. If the regulation is too much you’re welcome to sell and get out of the business. People who need homes don’t have that option.

      • No Pickovven, landlords are providing a free capitalist choice for those that can afford the going rate. The government, the one Sawant is a part of (and larger entities) are providing an essential service in the way of government regulations and financial assistance for those in real need, and for those that guarantee votes. But Sawant doesn’t realize that every action comes a reaction and the rents keep climbing. People that need homes do have an option, it’s called find something you can afford. It could be in Seattle if it wasn’t so regulated. It could be in Seattle if it wasn’t so expensive to transform a piece of land into a home. It could be in Seattle if zoning wasn’t so restrictive. It could be in Seattle if SFR wasn’t so wide-spread.

        • I don’t think we need kid gloves for landlords. And this regulation=unaffordability narrative is tired. Obviously it’s part of the story but it’s not anywhere near the whole story. We could completely deregulate and dezone tomorrow and Seattle would still be a very expensive city for years to come because it takes time for supply to catch up to demand even in favorable regulatory conditions. Seattle is a wealthy city adding many high paying jobs so the market for expensive housing is pretty strong. Because we haven’t satiated the upper-end market, many developers haven’t put much effort into trying to serve the mid-range market. All this is to say that a modest protection for vulnerable tenants isn’t too much to ask.

          • You’re right Doug, we should let folks who really can’t afford to be in a big city the opportunity to be here and non-institutional landlords shouldn’t have a say in how they manage their own investment properties. And you wonder why rents are $3,500/month in San Francisco. Keep piling on the la-la land proposals, keep watching the rents go up, up, up, up.

        • an un-zoned city would be chaos, IMO. I feel people who support this notion see it only from the residential side of the equation. There are many other building types and civilized needs that zoning helps contain.

          • “…if zoning wasn’t so restrictive.” sorry, I read too much into that. I still think my points are valid. by reducing zoning restrictions you are opening up a lot of problems for, from what I can see from you points, not a lot of gain.

            Maybe you could explain better what deregulations you think need to happen and how they will lead to reduced cost of housing?

      • If everything won’t be covered by insurance then Landlords will most likely raise rent to assure they are protected. I think Sawant doesn’t take a step back and look at the big picture here. Why do banks even demand a down payment? The lower your down, the more mortgage insurance you will pay and the greater your interests rates will be, which means higher monthly payments. Same principle! Landlords are not the bad players here. No need for a regulation!

      • Let’s look at this holistically from all perspectives.

        You make it sound like insurance is the magic wand.

        Insurance does not cover everything. Deductibles are commonly $1,000 or more.

        Then, the insurance premium goes up.

        You make it sound like it’s okay for someone to borrow your car, crash it, and tell you your insurance covers for the damages so they are off the hook.

        The tenant is liable for his or her damages. Not the property owner.

        What this entails is more risk for the property owner. Higher risk justifies higher returns, which inevitably means higher rent.

  2. I would like to see some research on the landlords’ side of moving-in fees. These are a substantial barrier for renters, I agree, at the same time I feel these encourage landlords to provide short-term leases. I am renting in Seattle while being landlord elsewhere, so I have a little experience from both sides.

    I think such a bill may be justified if landlords are using their current ‘excessive market power’ but not in case of these costs are actually economically justified. I just don’t know what is the case.

      • Not ‘fee’ per se. We charge deposit, part of which goes to paying off the last months utility bills. Usually people are leaving around 1st of the month, and the bills arrive over the next few weeks. We feel it is the easiest to pay it ourselves, and return the deposit, or whatever is left of it. We have not charged ‘cleaning fee’ either hoping it motivates the renters to clean themselves. The results are mixed but nothing too bad has happened.

        But I understand move-in fees well, looking for a renter is costly and some of them leave a mess.

  3. That’s insane. Here in Toronto landlords aren’t allowed to charge any “security deposit” or “non-refundable fees”. They can charge your last month’s rent, but that’s it.

    Seattle should just ban security deposits and non-refundable fees altogether.

    • Oh, you have a bad credit score? Please pay me three months worth of rent up front. Prior conviction? (if I’ll accept you..) add a few hundred more. I’ve never seen a connection between the rates of these fees and any value for renters.

    • WTF?! If there is no security deposit, what happens if the tenant damages the home? Who’s gonna pay for the repairs? If the property owner has to assume this risk, one thing she will do for sure is raise rents.

  4. Aggressively limiting refundable deposits makes it harder for people with bad/non-existent credit (such as new migrants) to find housing.

  5. Move-in deposits, like monthly rents, are a pricing signal. Legislating what move-in deposit should be allowable is just as futile as legislating the monthly rent itself, as rent control attempts to do.

    Setting a cap on move-in deposits in order to make housing more affordable is self-defeating because landlords will end up charging higher rent to make up for it.

    In the absence of such regulation, landlords raise and lower both move-in deposits and rents to attract tenants and maintain occupancy. If they charge too high a deposit, their units will be vacant. If they charge too little, they get less qualified tenants and have higher costs.

    A move-in deposit is a mechanism for pricing risk and uncertainty in the rental marketplace. Most tenants are good tenants and seek housing they are qualified to pay for. The deposit removes uncertainty for the landlord. The ability of a prospective tenant to pay a deposit is a signal that qualifies them to pay a lower monthly rent.

    Onetime move-in fees also reflect the actual cost of doing business. Apartment turnover is costly, so charging when the apartment turns over (as in cleaning fees) reflects the actual cost of doing business. Landlords have an incentive to retain good tenants, those who pay rent on time and care for their units. Observe that it is normal for good landlords and tenants to agree to rents at rates slightly below market, once a long-term tenancy is established.

    Capping move-in fees will hurt good tenants, who will be forced to pay higher monthly rents to subsidize bad tenants. It will also hurt newcomers and those who have no credit history or poor credit, by making it impossible for them to pay a higher initial fee to compensate for their lack of reputation or experience.

    • Howard,

      “If they charge too little, they get less qualified tenants and have higher costs.” are you saying people who make less money are going to do more damage to their apartments? I am not sure what you mean. please explain.

      “The ability of a prospective tenant to pay a deposit is a signal that qualifies them to pay a lower monthly rent.” Are you saying that people with disposable income get the added benefit of paying less in rent?

      “Observe that it is normal for good landlords and tenants to agree to rents at rates slightly below market, once a long-term tenancy is established.” In all my years of renting, this was never the case. Anyone have this experience of long term renting leading to a lower rent? Again, this is sounding like an advantage for wealthier people who have the luxury of job security or a more secure safety net.

      • It’s very common to exchange a static rental rate for a long period of contracted rental time: the small rental owner gets to exchange a stable source of cash flow (consistent rent) for low overhead (i.e., “the landlord doesn’t have to market the property and go thru the vetting process for a new tenant”) even if the rental price is below market rate. For institutional rental properties, especially funded by investors, they generally will not allow long-term/multi-year rental agreements because they are greedy for a better return year after year, so they want to reset their market rental rates every year. Rental market is soft? Institutional rentals will do everything to sign the lease for the same amount, and throw in a gym membership or some other shiny object. Small rental owners? They will lower rents until they find a renter.

        • Pablo,
          Actually, I understand that occurs, but I am trying to get at why it happens and what renters are able to make those kinds of arrangements. Sure, landlords will do this, but what gives them the sound feeling that they will have that tenant for several years?

      • What I am saying is … move-in deposits are a part of the price of the apartment, just as monthly rent is. Trying to legislate what move-in deposits are allowable, and also trying to limit what information a landlord can use to screen tenants (as Sawant’s proposal does), is simply a backhand form of rent control. It will have the unintended consequence of raising rents for new tenants, and thus will defeat the whole purpose of the law to make apartments cheaper.

        A brand new lease is a contractual negotiation between two parties who don’t know a lot about each other yet. Once landlords and tenants have experience with each other, as when the lease renews after one year, monthly rents often decrease slightly (in relation to market rents for new leases) because the landlord wants to retain a good tenant.

        Yes, a larger initial deposit discriminates against a person who can less afford to pay. And so does a higher monthly rent. That’s how markets work!

        • Howard, larger initial deposits discriminate more against people without savings than people who can less afford to pay. For instance, like a person with a new job, a person just out of school, or a person with a fixed income. Also, lowering the bar to entry helps the market by making it more free: people living in substandard units and people who are being priced out but can’t afford to move might both be able to.

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