Philly will consider capping apartment application fees at $20 and allowing security deposit payment plans

Philadelphia lawmakers will consider a pair of bills aimed at reducing up-front costs for renters in the city, a move that comes as housing prices are increasing and outpacing income growth.

One piece of legislation, set to be introduced Thursday by City Councilmember Rue Landau, would cap apartment application fees at $20. The limit could result in a significant reduction in moving costs for renters, some of whom, Landau said, pay up to $200 per unit they apply to live in.

A second bill would require that Philadelphia landlords allow renters to pay their security deposits in four installments over four months, rather than one large lump sum before moving in.

Landau, a Democrat who represents the city at-large and who is a housing attorney by trade, said in an interview that the goal is to make moving less cost-prohibitive, especially for low-income people, seniors, and people transitioning out of homelessness.

“We have a housing affordability crisis in Philadelphia, and that is an issue that I am working on holistically, but there is not an immediate quick fix to that,” she said. “What we can fix quickly is reducing up-front costs and make moving into an apartment easier and more accessible.”

But the proposed policy shifts — especially the one requiring that landlords allow security deposit payment plans — are likely to face resistance from landlords and property managers who say it could harm their bottom lines.

“I understand where this is coming from, but the problem is there’s too many bad actors,” said Greg Wertman, president of HAPCO Philadelphia, the city’s largest landlord association. “Every time they come up with this stuff, they drive up the costs for the mom-and-pop landlords who have the most affordable housing in the city.”

Landau’s legislation comes as housing is set to take center stage in City Hall this year. Mayor Cherelle L. Parker has said her housing plan, which includes building or rehabbing 30,000 units in the city, will be a cornerstone of her administration’s agenda this year, and her budget proposal set to be unveiled in March is likely to seek funding for that plan.

Several other Council members are expected to float pieces of housing legislation this spring. Council President Kenyatta Johnson said he is looking to address homelessness, especially among the city’s youth, this session. And Councilmember Jamie Gauthier, who represents parts of West Philadelphia, plans to continue a push she started last year to address low-income displacement in gentrifying neighborhoods.

» READ MORE: Philly is one of the least affordable major metros for its renters

Housing in Philadelphia has long been considered affordable compared with other major cities, but the city’s relatively high poverty rate means there is a high proportion of residents who cannot find housing at a price they can manage. A 2020 study by the Pew Charitable Trusts found that more than half of Philadelphia renters are cost-burdened, meaning they spend more than 30% of their income on housing.

Landau said cutting down on up-front costs would make shopping for an apartment and moving into one easier and quicker. Application fees are ostensibly to cover the cost of conducting background and credit checks on potential tenants, but Landau said fees as high as $200 often exceed the real cost of screening.

Her legislation would prohibit landlords from collecting application fees over $20 per unit — the same cap lawmakers in New York state set under similar legislation in 2019. Landau’s bill also would allow potential tenants to provide their own background and credit checks, so long as they were conducted by an accredited agency within the previous 30 days, potentially offsetting screening costs.

A second bill requires that landlords allow tenants to enter into a four-month payment plan to cover the cost of their security deposits, which are typically equivalent to one or two months’ rent. Most tenants are asked to front the security deposit, as well as the first and last month of rent, before moving in.

Wertman, of HAPCO, said the organization intends to push back on the security deposit bill, saying landlords will lose out if a tenant moves in, then fails to pay the security deposit. And he said landlords may see it as a red flag if a potential renter asks for a payment plan early in a rental agreement.

“Put yourself in a landlord’s spot. If that person cannot pay the security deposit, do you think they’re a valid candidate as a renter?” Wertman said. “Every landlord is going to be skeptical of any person that’s going to have to fall into this category.”

But Landau said that deposits can be cost-prohibitive, and that allowing tenants to pay in installments could make it easier for them to make monthly rent payments through the course of their lease.

“The landlords are going to get their security deposit,” she said. “They can just get it in a way in which tenants are able to pay for it.”