To read McMillan's article, go here.
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Michael Dunne: I'm Michael Dunne. In a debate a few years ago for New York City mayor, a fringe candidate famously ran as “the rent is too damn high party.” It was somewhat humorous at the time, but for millions of Americans and hundreds of 1000s of Oregonians, rental increases are no laughing matter. Today on the show, we talk to a national reporter at The Guardian, who's uncovered a practice by the largest apartment owner in the nation and one of the largest in Oregon, which charges enormous and specious fees that can be crippling to renters, such obscure and often unlisted costs like boiler management fees, solar rebuild fees, and even lifestyle fees often add hundreds and even 1000s to monthly rent. In an era where housing costs are soaring in Oregon, these fees can be the difference between stable housing and eviction. Tracie McMillan, reporter for The Guardian, and also best-selling author. Thanks so much for joining us.
Tracie McMillan: Thanks so much for having me.
Dunne: Your piece was very interesting and kind of infuriating piece that dropped today in The Guardian. It's titled Extremely Overwhelmed Apartment Renters Face Rising Tide of Fees. Let's start with this. Who is, or what is, Greystar? It's a company I'm sure a lot of people have never heard of.
McMillan: Yeah, so Greystar is the largest owner and manager of apartments in the US. They're a private equity firm that does a lot in real estate. They're in fact they're global, so they have more than $300 billion of assets around the globe, and have a pretty significant footprint in the US. I mean, the scale of the rentals that they manage is unprecedented here. Prior to the Great Recession, the largest sort of landlord and property manager set up in the country had about 170,000 180,000 units of housing. Greystar has just about 1.1 million at this point in the US.
Dunne: Well, it's been a while since I've been a renter, but you know, conventional wisdom has always been you pay a monthly rent and you expect that it covers a whole host of things, exempting perhaps utilities and whatnot. Talk about what you found with regard to this, as you say in the title, rising tide of fees, and, and how Greystar fits into all of this.
McMillan: Yes, so what we found is that property managers, and you know, we're looking at Greystar, but this happens with many property managers and landlords across the country, but we found that property managers have really started to pull out, they have pulled out costs that used to be included in the rent and turn them into separate fees that they pack on on top of it, so this has led to litigation around the country, Greystar is currently facing nine class actions, making various allegations around these fees and practices. Often, right, these cases are citing a fair competition problem, because what happens, right, is if you used to charge one rent and that covered all the utilities that went into the building and covered all the maintenance, all the common area cleaning, and all of that was all one fee, right. So, say it's $1,500 now. What you're sort of seeing is that landlords will list apartments for $1,500 but then tack on many of those fees that used to be included. Wow, right. And so, you'll see leases, you know, that'll have 579 11 mandatory fees on top of the rent. Often the leases are written in a way where you can be evicted if you don't pay them.
Dunne: Is this a fairly new phenomenon?
McMillan: I think that this is something that's been evolving over time, and particularly with the advent of fintech, right, it just becomes so much easier to leverage these fees across a large portfolio of properties. I think just logistically, a generation ago, it would be really hard, right, to manage fees on top of rent across dozens, hundreds, 1000s, you know, hundreds of 1000s of units now, because it's so easy and seamless to do things financially online. It's very easy for a company like Greystar, particularly, that can put real investments into its software and things like that, right? To just sort of figure out, okay, well, if we're going to help, you know, people manage their buildings, we. Can offer the suggested menu of fees that you know they might want to charge and make it possible for them to just sort of charge across an entire portfolio without any additional effort, right? Because if you start looking at, say, the way a small mom and pop landlord that has 1234, units of housing, right, it's not really worth it paperwork wise to sort of charge everybody $2 a month for pest control, if you are a landlord or a property manager who is in charge of a million units of housing, and you can charge $2 a month per unit for pest control, right? That's $2 million more a month in revenue.
Dunne: So, so give us an example of some of these fees that you, you uncovered.
McMillan: Sure, so I think one that I've heard a lot of people commenting on is something called pet management, particularly something a sub service of that called poop prints, which is DNA testing of dog poop, essentially, right? So I saw one lease that had four different pet-related fees all sort of piling on top of each other, so there was a pet rent, a pet deposit, a pet fee, and pet management third party, where you're paying a third party sort of subcontractor to sort of verify that your dog is in the building or something like that every year, right, so that can sort of bundle up, we also found a lot of fees for common area utilities, as well as just sort of different utilities that you know, I think a lot of renters hadn't seen sort of themselves getting billed for before, things like storm water drainage, variable refrigerant flow, boiler management fees. There's actually a lawsuit in state court in Colorado arguing that boiler fees sort of unfairly move the cost of basic building services like maintaining a heating system onto tenants.
Dunne: Wow, okay, so I mean I think, as you point out, technically speaking, these fees are legal, but are they, are they kind of pushing the envelope of regulations or laws that are supposed to limit these types of fees?
McMillan: I think the reporting we did shows that these fees are definitely pushing at the limits of what tenants are willing to accept, and where sort of our regulatory laws currently stand. You know, Grace Star has got nine class actions that it's facing right now, or potential class actions that are alleging various fair competition things. So, there's rarely are only a few localities specifically ban specific kinds of fees, but a lot of this stuff can get covered by fair competition, right? Because if you're advertising one price and then adding mandatory fees on top of it, you're sort of doing a bait and switch, right? That's the argument in the lawsuits that folks are facing over this. We also saw, you know, in December, Greystar settled with the Federal Trade Commission, which had brought suit against it over the use of junk fees, and the terms of that sentiment required it to roll any fixed mandatory fees into an advertised price, so the company is still allowed to advertise what they call a base rent, so that's sort of like the lowest basic rent, and then they're allowed to just sort of add on as many fees as they want, but they're now required to disclose the existence of them, which was not required before, and anything that's fixed, so like a boiler management fee that's just about having somebody maintaining the boiler, right, that has to be part of an additional monthly price that they're calling a total monthly leasing price. Interestingly, and we'll do a piece that covers this more in-depth next month, there's a whole subset of mandatory fees around utilities that are technically usage-based, which are not required to be rolled into that cost that's being advertised, and that can be a very significant amount of money. I mean, Greystar actually, when we were in conversations with the company, pointed us to an entry on their blog where they said, look, just like water, sewer, and electric could run up to like $247 a month, right? So that would be on top of the advertised rent, and it's not on any of the paperwork that you sign.
Dunne: Greystar, is very pervasive. I think I think it was like 42 states and Washington, and they operate here in Oregon, correct?
McMillan: Yeah, they have about 19,000 units of housing across Oregon, and let me see, I think in the Eugene area there's just under 3000 they've got about 6200 in Portland, so you know they're usually in cities, you know, this is a multi-family property manager and landlord, and so you know they will find buildings and sort of help landlords and management companies run them, like in our conversations with them, they talked with. Us about how part of what they do is they advise owners on what kinds of fees and rents to charge.
Dunne: I know you talk to renters of Greystar units who had to live with these fees. Give us an example of some of the things they told you.
McMillan: Yeah, so one of the people I talked to was a woman named Jaslyn Cosey, who was a Las Vegas customer service worker, so she had signed a lease for a two-bedroom apartment, was about 1500 16, think was around $1,500 a month, and you know, within a few months, right, her monthly fees start racking up, which she had not expected, right, because she's getting charged for utility fees, and then she was disabled, and her disability checks shifted in their timing and started coming in two weeks later. Jasmine would argue that because that's related to disability, that should be accommodated, but Greystar would not do that. So, they started charging her a late fee and an attorney fee every month, and so Jasmine wasn't able to keep up with all of these fees, right, because no matter what she did to pay her rent, right? She had an assistance program helping her with rent. The company would apply her rent to the fees first, so then she would always be behind on her rent. So one of the things that we're seeing with tenants is that because of the ways the leases are written, tenants might want to argue about a fee, but if they don't pay it, the company just takes the money from their next rent check and puts it towards the fee, and then they're short on rent. So, effectively, tenants can't dispute a fee, right, because they're going to be putting themselves at risk of eviction.
Dunne: Obviously, we're very cognizant here in Oregon, all up and down the West Coast, of how high housing costs are so pervasive. I'm wondering, Greystar obviously doesn't operate in a vacuum. Is part of the reason that they can charge these fees is because there's such a scarcity of housing, they kind of have a captive audience to some degree.
McMillan: I think that's right. Zillow puts the increase in rent since the pandemic at more than a third, right. So that's putting a lot of tenants in pretty difficult circumstances. It's very difficult to find an apartment, so once you find something, I think most tenants are trying to make it work, even when, right, it's going to be more than they can, they actually can afford. It's pretty rough out there.
Dunne: Yeah, you know, obviously you reached out to Greystar for comment. Give us an idea of what they've told you.
McMillan: Absolutely, I mean, you know, Greystar is a business, and you know their argument is, look, this is legal. We don't charge people fees. We're not legally allowed to charge them. We don't, or I should say, Greystar's like very clear about this. This is legal, you know. We do not charge fees at our, the buildings that we're managing, you know. Tenants are not being charged anything that they're not legally allowed to be charged for. There's nothing in the leases that you know is not allowed to be in the leases, and if tenants, you know, would do a better job, really. I mean, the implication is, you know, there's full transparency. Everything is now listed, and you know, go ahead and make a decision, right? And I think, you know, as far as specific regulations on housing goes, in most parts of the US, right, that's, you know, pretty much it's, you know, do the best that you can out there with the information that you get now. It's important to understand that the FTC is currently in a rulemaking process to come up with regulations for junk fees and housing nationwide, so that would sort of set a standard amount of fees and sort of what needs to be disclosed and things like that. What we have seen from Greystar and from other industry leaders is that the emphasis is on transparency and on giving people all of this information. What our reporting showed is that, as far as consumer and marketing science is concerned, a lot of tenants are likely to be overwhelmed, and they're vulnerable to signing up for things that they actually can't reasonably be expected to figure out the pricing for.
Dunne: Yeah, I can imagine it's like those terms and conditions we often see when we're signing up for a, you know, cell phone package or something like that. It's so lengthy and wordy, I could imagine it must be a real challenge just to wade through it.
McMillan: Yeah, I mean, I saw leases in this project that were as long as 101 pages, and that had as many as 33 different documents within the body of the lease, right? Most leases I saw had between two and three dozen different fees listed, and those are, you know, varying levels of mandatory or optional one time versus recurring, and things like that, but it's a lot to sift through, and if you're a tenant trying to figure out, well, what is my cost going to be, right? This full transparency model is actually really disempowering the consumer advocates, not advocates, or the consumer marketing experts we spoke with were. Very clear that you know when you have an environment where there's a basic price and then a lot of fees on top of it, consumers just look at that basic price and that's really where people are going to be competing, right, but where businesses would be competing for market share is on what that basic price is, whatever the additional fees are, because people just can't manage all that information.
Dunne: I imagine that this kind of situation might lead to an increase in people being evicted.
McMillan: So, there's no research specifically tying fees to evictions, but we have seen, particularly around the utility fees, that that can be a problem. What you have happen right is folks sign up for apartments where they think the rent is, say, $1,500 a month, and then they're getting several $100 a month in utility fees charged on top of that, and then right, they start falling behind when they pay their rent, the rent is put towards the utility fees, as opposed to their rent, right? So then they're behind on their rent, and also often the leases are written in a way where just not paying the utility fee can be grounds for eviction, so that's really tricky to track, and there nobody's sort of doing that research wise, but certainly anecdotally, you know, we found, you know, we talk about Jasmine Cosey in the piece, who sort of ran into this, where the expenses snowballed, and she ended up being evicted, and I, you know, I've talked to several other tenants who are not in that story but have had similar experiences.
Dunne: Tell folks about Bob Faith.
McMillan: Sure, so Bob Faith is the founder of Greystar. He's actually from Oklahoma, but you know Greystar is based in South Carolina. He is a billionaire, so I believe that worth is estimated around five or 6 billion in wealth, and you know he's really built this business out over the last 30 years or so, figuring out how to provide business services in a way that creates a profitable business for him, and then is helping landlords sort of manage their properties, and also building profitable businesses for them as well.
Dunne: Okay, okay, we are used to Congress oftentimes holding hearings, and they've done a lot on this concept of junk fees, and I imagine that is a specific legal term, but is it possible that maybe a lot of congressional leaders maybe didn't know about this, and this could become something that Congress acts upon.
McMillan: Well, there's definitely been congressional interest in junk fees over time, and so you do have a bill right now, just with Democrats, right now, about ending junk fees for renters. That's put forth right now. There's a piece of legislation in front of both houses of Congress, sponsored by Democrats, that's Senator Merkley, they're in Oregon, sponsoring in the Senate, and Senator Frost, the Gen Z rep from Florida, behind the End to Junk Fees for Renters Act, that's something that is looking at sort of federally subsidized housing, right, because that's sort of where Congress can intervene. You've also seen, you know, some discussion under the Consumer Financial Protection Board, when it was a stronger agency around this stuff, and you know, under the Biden administration, the Federal Trade Commission did consider regulating junk fees and rental housing. They declined to do that during sort of that administration, and instead focused on the regulations we now have in event ticketing, right? So, Ticketmaster, and sort of vacation rentals like Airbnb and VRBO, okay, so they declined to regulate rental housing at that time, filed suit against Greystar, right, which settled this past December, which is why there's some discussion already for Greystar about how to sort of do a better job of disclosing fees, and then in January of this year the Federal Trade Commission announced plans for rulemaking, which opened up the spring, so you actually had a comment period already this year, and so that agency is looking at regulating junk fees and rental housing. It will be interesting to see sort of where that ends up, you know, most of the sort of movement in Congress around housing has been, you know, as we saw this week, has been around sort of fixing the supply side of housing, you know, the fee part sort of comes further downstream from there. There's I don't think there's anything in the bill that passed this, the House and Senate, right, that's about fees in particular. All right, it's much more about just sort of making it cheaper to build housing and get more housing built. It's also something Greystar will benefit from, because it is a developer of housing on both multifamily and single family.
Dunne: Tracie, my last question for you, and I often like to allow listeners to peek behind the court, the curtain. Talk a little bit about how you put this all together. I mean, it must have been something that took a long period of time, and, and obviously, having to search out people who are willing to talk about the fees that are impacting their lives.
McMillan: Sure, so I'm an independent reporter working with The Guardian here, so this was a essentially a part-time job for about the last year, and you know, honestly, a lot of spreadsheets, right. So, we built, you know, ways to track the different fees we found across the country. There are 125 different named fees that we found at Grace Star listings and sort of leases across the US. Also got access to a data set tracking the specific geographic holdings of Greystar down to the city and state level, which you know, if anyone out there wants to find it, right, we'll be sharing that online, so that sort of local folks can see Greystar's footprint in their community, and then a lot of, honestly, a lot of work with legal cases, and just going through and seeing what the sort of history of litigation against Greystar was, and what people were concerned about, and you know, it really was junk fees coming to the fore, as far as anything in sort of the world of class actions went.
Dunne: Well, it's a great piece. We'll link to it in our web post. She's Tracie McMillan, reporter for The Guardian. A really strong piece about these hidden junk fees in rentals. Tracie, thank you so much for coming on and talking with us.
McMillan: Thank you so much for having me. This was great.
Dunne: That's the show for today. All episodes of Oregon on the Record are available as a podcast at KLCC.org. Tomorrow on the show, you'll hear from five-time Grammy Award-winning singer, songwriter, and performer Mary Chapin Carpenter. She's joining forces with Rhiannon Giddens for a concert in Bend this weekend called American Tunes: Lift Every Voice and Sing. I'm Michael Dunne, host of Oregon On The Record. Thanks for listening.
