Small Seattle landlords frustrated with late rent fees now capped at $10

The City of Seattle implemented a $10 cap on late fees for rental payments Wednesday after the council passed the decision on a 7-2 vote. Councilmembers Alex Pedersen and Sara Nelson voted against it.

“This comes on the back of about two dozen other laws that have changed in really substantial ways, as well as the pandemic eviction moratorium that had a lot of impacts for small landlords,” Alley, a small Seattle landlord of three properties, told Jason Rantz on KTTH 770 AM. “And that context is really never discussed by the city council, which is kind of astounding.”

Nationally, it’s most common for landlords to choose a percentage of the rent to determine a late fee — most commonly 5% of the monthly rent price. The typical range for a late fee is between 5% and 20%, but there is a state-wide movement where many cities have only been charging 1-2%. Auburn and Burien both recently passed legislation to create a $10 cap before Seattle followed suit.

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But Alley argued that a $10 fee is not enough to incentivize tenants to pay on time, creating more hassle for local landlords.

“I very much understand the stress people have trying to make that monthly payment, but to have such a tiny, tiny fee associated with such a large financial commitment that you have a legal contract for, it’s just completely out of whack with any other business practices,” Alley said. “So it really takes away those guide rails that would be in a standard legal contract. And we’ve never once charged a fine. We’ve had tenants pay late, but we’ve always been able to work it out.

“Most people really do try to pay their rent on time. Most people do have a decent relationship with their landlords,” Alley continued. “There are good landlords, bad landlords, good tenants, bad tenants, we’re all just people. And there were systems in place for regulating that.”

Late fees are also charged for each day, or sometimes each week, the tenant is late, according to Alley, while this legislation creates a cap for the entire month.

“Anyone managing property, especially at a small scale, there are so many other things that you’re responsible for. Obviously, property taxes, but we have roofs to take care of, sewers to take care of, maintenance, things that come up with plumbing or broken windows. There’s just any range of things that you’re responsible for keeping things humming along in a reliable way. And that’s part of the risk and responsibility you step into as a small landlord.”

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Councilmember Tammy Morales, one of the prime sponsors of the bill, argued on Wednesday that wages are not rising at the same rate as the cost of housing, and being late on rent shouldn’t put people further in debt, or worse, jeopardize people’s ability to remain housed.

“It’s especially ironic coming in the same week as I understand the state legislature is finally pushing through the missing middle housing legislation,” Alley said. “Everyone seems to be a strong proponent of adding duplexes, triplexes, small rental housing, small apartment buildings, and backyard cottages, but who’s going to be able to own and operate these in this environment? If you listen to city council meetings, it is so disparaging, so misleading.”

Alley told Rantz that while she loves her specific neighborhood and community within Seattle, she, among other small landlords, is educating herself on exit strategies to depart the city very quickly if things go too awry between property managers and the city council.

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Evidence has stated late fees do not incentivize on-time payment. Rather, data from landlords cite that renters consistently prioritize paying rent before all other bills because the prospect of losing housing through eviction has dire and compounding consequences.

The council argued late fees accumulating as debt would harm people’s credit scores, making it hard or impossible to acquire new rental units in the future.

The rent late fee cap now heads to the Mayor’s desk. Mayor Harrell has not said if he will sign the bill.

Listen to the Jason Rantz Show weekday afternoons from 3 – 6 p.m. on KTTH 770 AM (or HD Radio 97.3 FM HD-Channel 3). Subscribe to the podcast here.