Major changes at stake as committee reviews landlord-tenant ordinance

A city committee on May 16 backed a number of potential changes to the Residential Landlord-Tenant Ordinance sought by tenants’ groups, such as using screening tools other than credit reports to assess renters’ ability to afford apartments.

The city’s Housing and Community Development Committee didn’t take a formal vote, but Council Member Eleanor Revelle (7th Ward), committee chair, summed up members’ views as “very supportive of moving ”in the direction of looking for alternatives to how the present system works.

The review is in response to studies indicating that rents in Evanston are up 17% from 2022 and evictions are reaching pre-pandemic levels.

High housing costs disproportionately affect Black and Hispanic/Latino households, Lindsey Wade, housing and economic development analyst for the city, told committee members

Meanwhile, with the city’s residential vacancy rate at less than 10%, “it is critical the City of Evanston consider adding modernized, systemic, low-cost, high-impact policies to its Residential Landlord Tenant Ordinance,” she said.

Committee members showed support at the May 16 meeting for several measures.

Fair and compliant housing

Some tools now in use to screen tenants are inaccurate and noncompliant, a staff report said. These tools remove more than half of would-be renters from consideration, according to the staff report.

The committee discussed exploring tools such as are used in Portland, Oregon, the State of Indiana and other places that would enable landlords to “screen in” rather than “screen out.”

Screening in would ask landlords to eliminate blanket rent-to-income ratio requirements. Instead, all sources of income – wages, child support, SNAP (food stamp) benefits, state TANF (Temporary Assistance for Needy Families) – would be taken into account.

Council members Devon Reid (8th Ward) and Bobby Burns (5th Ward), the two renters on the committee, spoke strongly in support of such a change.

“I’ve never had a residential rental provider that asked me about any of those sources,” Reid said.

“I do think that a blanket credit score of 700, 650, 625 is not a great way to determine someone’s ability to pay,” he added.

Burns told committee members that credit scores are “a huge issue,” based on his conversations with tenants as well as from personal experience.

“It’s almost like some landlords, they’re shopping around – right? – and they’re just using credit scores,” he said. “I know some people who are doing more than that –discriminating based on race sometimes, too. So there’s a lot going on, but especially with the credit scores, because they [landlords] don’t have to take you.”

“One thing that’s good about being in Evanston,” Burns added, “is people want to live here and in every corner of Evanston someone wants to live here. So what I find is that landlords are sitting back and waiting to find the right tenant. And if they are basing it on an individualized assessment that was comprehensive, great. But when it’s just the scores – which, again, from the feedback I’m getting is what we’re seeing the most, especially when someone’s displaced – I am [against it],” he said.

Hugo Rodriguez, another committee member, agreed that what is needed is an individualized analysis of what “caused a family’s credit score to be low and get to that determination.”

He said the reason income-to-rent “is relevant to a landlord is because, if I take 50% of that family’s income to pay for my rent, what are they [the renters] living on? Because the income used is the gross income of that family. So they have to pay taxes, they have to pay transportation, gasoline, clothing, food, as well as shelter. So if I don’t have that ratio in my mind, these people make $5,000 a month, how am I going to charge them $2,500 for rent?”

Sarah Flax, the city’s community development director, said officials are examining systems where credit ratings are not the only source, noting the U.S. Government Accountability Office has been looking at the issue.

“I’m not saying that’s the solution to everything,” she said. “But there are attempts to give alternatives to the credit scores that we have right now – that take into account things like ‘Have you paid your rent?’ and isn’t just based on whether you pay credit cards and things like that. And I think we have to support that type of thing,” including for “people who don’t have credit cards and stuff – don’t have credit scores.”

Hidden fees

Committee members also spent time discussing a practice of some landlords to rename security deposits to avoid regulations, by labeling it a fee or charge or anything other than a security deposit.

Wade noted that move-in fees, administration fees and application fees are all currently unregulated. In a report on renters’ rights, the White House “explicitly called for an end to fees like this … especially when combined with security deposit requirements, maintaining they really constrained options with tenants and makes a huge impact,” she said.

Groups such as Connections for the Homeless will not cover the costs of those fees under the conditions of their grants, Wade said.

“So what we’re proposing is that we ask landlords to list those application fees and admin (administrative) fees upfront and make them reasonable to the actual costs, and same with moving fees,” Wade said in her report.

“So what is the cost of the screening service? How much does Zillow charge you to check out a tenant’s rental history and background? That’s what you should be charging a tenant for their application.”

Reid said he consistently receives calls from renters relating that ”’I’ve paid a $50 application fee here, paid a $40 application fee here, I paid $100 application fee here and they’re all nonrefundable, and I didn’t get accepted to any of them.’”

Dropping interest on security deposits

On security deposits, committee members backed a proposal to remove the requirement for landlords to pay interest on security deposits. 

Wade said that in feedback sessions with landlords about changes under consideration some admitted they renamed security deposits to avoid paying interest or meeting other provisions.

In addition, she said, “with interest rates being very low right now, it seems that calculating the interest outweighs the benefit to tenants.”

Reid was the lone committee member to express reservations about the proposal. He suggested instead that some distinction be made between a small landlord and one with hundreds of units “and you just get to hold on to the interest.”

Exorbitant late fees

Committee members also discussed the issue of excessive late fees. Currently, a lack of regulation results in daily or weekly late fees, with some tenants charged $50 per day, Wade reported.

Staff is suggesting limiting late fees to a percentage of rent or rent range, and to once per month. The model being proposed is in line with Chicago as well as Cook County, Wade said.

“Essentially,” she said, “the lack of limitation on late fees has resulted in some folks being charged a daily fee or weekly fee,” she said.

“Some landlords even suggested during our feedback session that we should do that. And as you can probably imagine if that was … something like $50 per day, or $100 per week, that could really put tenants in a very difficult position.

“A lot of landlords believe they [the fees] incentivize timely payments, which is understandable,” she said. “However, research has shown that they don’t incentivize timely payment. A lot of times the reason that it’s going on is because they don’t have the money that day.

“So people weren’t getting Social Security checks, which a lot of times are paid on the first of the month and the third of the month. And so they just don’t have the money on the first or can’t get it to the landlord on the first.”

Rodriguez pointed out that landlords face consequences that the tenant doesn’t suffer if they fail to make their mortgage payments on time.

“For instance, if I’m late on my mortgage once, I’m mortgage-averse by every lender in town,” he said. “I will not get a mortgage 30 days late and I’m done. I’m fried. I’m not saying that the one tenant should carry that entire burden – especially for a landlord that has multiple units.”

But a two-flat operator, for instance, “would be 100% affected by being late on their mortgage,” he said. “Even if I have 40 units, I’m affected by five of my tenants not paying me their rent on time, because I have obligations. I have to pay the guy who cleans the snow and I cannot wait.”

Committee members expect to continue discussion of other issues, including unjust nonrenewal, at their next meeting, scheduled for June 20. Eventually committee recommendations will go to the full city council, which has final say on the matter.

Unintended consequences

The changes to the city’s Residential Landlord-Tenant Ordinance have been in the making for some time. In April 2021, the city’s Housing and Homelessness Commission discussed potential items and policies that should be considered for updates in advance of a new Cook County Landlord-Tenant Ordinance that was to go into effect.

Staff sought local landlord and community feedback in compiling its latest report, reaching out through surveys, emails and one-on-one chats, Wade said in a memo to the committee.

“Although landlords expressed concerns about a number of the proposed changes, they also provided practical suggestions for some, as well as insight into how landlord-tenant relationships are navigated. Conversely, tenants and other community members were in support of the updates,” she said.

Among the speakers during the public comment portion of the May 16 meeting, Jim McKee, who owns 39 rental apartments in south Evanston, expressed concern that the proposed changes not cause “unintended consequences.”

He pointed to what he called “a flaw” in Chicago’s landlord-tenant ordinance allowing tenants to sue their landlord for even a minor list of infractions, such as for failing to write out a security deposit interest check and send it to the tenant.

“And it could be like, you know, 10 cents or something … and the tenant and their lawyer can file a lawsuit to collect two times the damage, two times the security deposit, plus attorney fees as damages and attorneys can file class action lawsuits.”