What are Junk Fees?

By Sarah Weber

One of the latest issues on the Biden-Harris administrative platform is the idea of “junk-fees”, specifically in its relation to housing. A “junk-fee” is an unexpected fee that the consumer must pay in addition to what they are purchasing (Kagan, 2023). This can be anything from a service fee on a website to unexpected additional charges on mortgages or rentals. These fees create an undue burden on consumers resulting in an even greater proportion of income being used for housing alone.

The cost burden of these “junk fees” is only exacerbating the affordable housing crisis that we live in right now. When individuals are already spending over 30% of their income on housing, additional unknown fees can leave a significant impact on individual financial wellbeing. What may look like a drop in the bucket to some is much more to others. Some renters have been known to pay thousands of dollars on application fees alone; money that they will never get back. Even on a larger scale, these burdensome fees have a tendency to weaken market competition which can, in turn, have a negative impact on the economy (Biden-Harris Administration and Secretary Fudge Take on Junk Fees in Rental Housing, 2023). These issues have grabbed the attention of the Biden-Harris administration and they have begun pushing for congressional legislative action.

The first step at reducing this strain on renters and homeowners is to increase transparency. Currently, most “junk fees'' are unexpected and not disclosed to individuals before signing a lease or contract. By developing a commitment to transparency, several home buying/renting websites have been able to disclose these fees to the consumer, henceforth prevent an undue cost burden. Several popular websites have made this commitment through various programs. As of now these include Zillow.com, Apartments.com, and Affordablehousing.com, all popular renting websites. 

Although transparency is needed, it is not enough to completely remove the cost burden on consumers, especially those of a lower income. Several federal level policies are needed to reduce this strain on renters and homeowners. Some states and municipalities have already enacted effective policies, however, there is a need for them on a federal level. To understand the scope of these policy changes, let us look at a few examples. 

The first option is to create a legislative cap on the price of rental fees. In some cases, rental fees for one application can be hundreds of dollars. Often, when looking for a place of living, tenants have to apply to several places in hopes of being accepted into one. This leads to individuals accruing hundreds to thousands of dollars in junk fees. 

Another option is to make lease documents more understandable. In many instances, the diction used in leases is convoluted and challenging to understand, leading renters to sign off on paying additional fees without realizing it. HUD proposes that leases have an additional succinct summary page displaying the total costs renters are expected to incur.  

Finally, the Biden-Harris administration is advocating strongly for the adoption of a Renters Bill of Rights. This document would provide a federal framework for renters and landlords to follow and understand the wide range of state and federal housing policies (Policy & Practice - July 2023, 2023). Although it has yet to be officially created, the administration has created a blueprint in order to establish an initial framework. 

Junk fees are a significant issue for renters and homeowners in today’s climate. For this, it is vital that these policies are passed in order to remove this cost burden on consumers in an already unaffordable housing market.

References

Biden-Harris Administration and Secretary Fudge Take on Junk Fees in Rental Housing. (2023, July 19). HUD. Retrieved July 28, 2023, from https://www.hud.gov/press/press_releases_media_advisories/HUD_No_23_146

Kagan, J. (2023, March 15). What Is a Junk Fee? Investopedia. Retrieved July 28, 2023, from https://www.investopedia.com/terms/j/junk_fees.asp

Policy & Practice - July 2023. (2023, July). HUD User. Retrieved July 31, 2023, from https://www.huduser.gov/portal/sites/default/files/pdf/policy-and-practice-publication-2023-july.pdf

SARAH WEBER IS A SENIOR AT THE UNIVERSITY OF NORTH CAROLINA CHAPEL HILL AND IS AN INTERN FOR EMPOWERMENT INC. SHE IS DOUBLE MAJORING IN PUBLIC POLICY AND HISPANIC LINGUISTICS WITH A MINOR IN ENVIRONMENTAL SCIENCE. SARAH IS VERY PASSIONATE ABOUT AFFORDABLE HOUSING AND WANTED TO USE THIS BLOG AS A TOOL TO TEACH THE COMMUNITY ABOUT THIS CRISIS THAT WE LIVE IN.