Hawai‘i landlords may soon only be able to charge potential tenants one application screening fee per household, and that fee cannot exceed $25.
Senate Bill 3107 and House Bill 2139 intend to regulate the price and quantity of these application screening fees, which are collected to cover the costs of screening a potential tenant. These bills also will require any unused portion of that fee to be returned to the applicant.
The cost of application screenings varies widely and may exceed the actual price of one, according to the bill’s language. Many potential tenants are unable to afford the cost of multiple screens that are required to successfully secure a rental unit.
The bills were put forward by Gov. David Ige’s administration and must clear a final committee in the House and Senate before moving to floor votes in each chamber.
A landlord’s vetting process may include personal reference checks, tenant reports and credit reports of potential tenants. Right now fees can be charged even if the prospective tenants are not seriously considered and the screenings are not conducted.
Some applicants cannot afford the cost of living in Hawai‘i, because wages have not kept up with housing prices, said Kristen Alice, director of community relations for Hope Service Hawai‘i and vice chair for Community Alliance Partners. She said that this bill will help reduce homelessness across the state.
An estimated 22% of renter households in Hawai‘i are extremely low income, according to the National Low Income Housing Coalition. Hawai‘i continues to have the second highest per capita rate of homelessness in the United States, with about 46 out of every 10,000 people experiencing homelessness.
“People are trying to find any housing that they can get into,” Alice said. “But with these application fees – that are out of control – sometimes we see them at $40, $50, $60 and sometimes they want to charge each adult in the household. That’s a lot of money.”
It has been a standard practice for landlords to conduct screenings on any potential tenant over the age of 18 that will be on the rental agreement, according to written testimony from Kenneth Hiraki, director of government affairs for the Hawai‘i Association of Realtors.
Property managers also can order various reports that can include criminal background checks, eviction history and other public records to properly vet a tenant.
At a recent hearing on HB 2139, Hiraki expressed concern about the bill’s unintended consequences that could hurt those in lower income brackets. It is not uncommon for multiple applicants to be on the application, he said, because they want to combine incomes to qualify.
Under this bill, they can only be considered as one applicant as far as the screening fee so, “chances are, they’re not going to get the unit,” Hiraki said.
“It can happen for UH students, for example, as they apply for a house, and there’s four bedrooms, and they can’t qualify individually but can qualify as a group. This won’t allow them to be considered,” he said.
Hiraki also said that the basic screening fee is currently $29. So the $25 maximum limit wouldn’t even cover the costs. Administrative and labor costs may also be included as part of the application process, such as administrative staff time and calling references. It is unclear if those would be covered under the legislative measures.