Update 10/3/2016: The Seattle City Council has passed out of committee legislation that is, essentially, piecemeal rent control. The proposed legislation is full of unintended consequences and won’t work. Here’s a comprehensive explanation of why from the Rental Housing Association of Washington shared at today’s Council hearing on the legislation. 

Re: CB 118756 – caps on rental housing move‐in fees

Dear Councilmembers,

The Rental Housing Association of Washington (RHAWA) represents 5,100 independent landlords who operate their property as a second job. Their units are nest eggs for the future, not trust funds for luxury now. For the past few years, independent landlords in Seattle have been hammered with regulations which harm their ability to mitigate the huge financial risks they take when renting their private property.

The latest proposal, CB 118756 – caps on rental housing move‐in fees – presents many unintended consequences, is poor public policy, and should not receive any further consideration by Council. The presentation at today’s Energy and Environment Committee – which in and of itself presents an odd forum for hearing a bill regarding rental housing – and purported by WashCAN to support the need for CB 118756, is based on information collected by a methodology known as “snowball sampling” and is severely flawed.

Snowball sampling is a non‐probability sampling technique where existing study subjects recruit future subjects from among their acquaintances. Literally, WashCAN is basing their entire report and policy recommendations to Council on responses they received from their own members, their members’ friends, and individuals who actively seek out their information on social media.

That CB 188756 is based upon flawed reports and arguments is enough of a reason for it to not move forward, but is only one part of a lengthy list of concerns about unintended consequences for both tenants and independent landlords.

The idea that move‐in fees can be capped and spread out over a period of time without any further impacts to the rental housing market is fundamentally wrong. The very reason independent landlords charge security deposits and non‐refundable fees is to guard against huge financial risk and to ensure that the rental unit is returned in a reasonable condition upon termination of the rental agreement. We take more than 6,000 calls a year from our membership with a great deal of them focused entirely upon lost income due to property damages and unpaid rent.

Move‐in fees are the only means, outside of monthly rent, for independent landlords to cover their risk. In fact, the ability to charge move‐in fees, which are overwhelmingly refundable, allows independent landlords to keep monthly rents lower. This is a benefit to tenants.

CB 118756 will also strip independent landlords of the ability to offer underqualified applicants an opportunity for tenancy if they supply additional financial securities. This will significantly harm the very renters purported to be helped by this legislation – those who are financially disadvantaged. Without an ability to mitigate the risk of renting to an underqualified applicant by asking for a larger deposit, independent landlords will simply no longer offer underqualified applicants housing opportunities.

CB 118756, if enacted, will also lead to screening standards for tenants are greatly increased to ensure that the tenant who qualifies is very highly qualified – particularly when pairing this legislation with CB 118755 which forces independent landlords to rent to the first qualified applicant. Again, this means even less housing opportunities for renters with few resources and / or problematic rental backgrounds.

Also concerning is the provision which would force Independent landlords to offer move‐in fee payment plans to tenants at their request. It must be understood that independent landlords are not lenders with unlimited capital and an ability to absorb financial losses by spreading risk over thousands of units.

Forcing independent landlords to provide payment plans ‐ essentially 4 to 6‐month term, 0% interest loan ‐ as requested by a renter is unfair, and creates an uneven playing field until the point where all move‐in fees are paid in full. Without a fully paid security deposit, for example, a tenant is able to easily break a term lease without much, if any, repercussions. For an independent landlord, having a tenant with no skin in the game will lead to finding other ways to offset their financial risk.

RHAWA is asking you to consider the basic realities of risk‐reward economics involved in renting private property. Sufficient, up‐front financial guarantees are necessary to ensure things such as damages and unpaid rent will be covered.

As an alternative to placing independent landlords at huge risk, causing rents to increase, and restricting access to rental housing for underqualified renters, RHAWA asks that the City consider allocating dollars within the renewed housing levy to create a revolving fund for providing deposit assistance to tenants.

Thank you for your consideration.

Sincerely,

Melany Brown,
Director
Rental Housing Association of Washington