A wave of state-level “junk fee” reforms is fundamentally altering the multifamily landscape. In 2025, with federal action stalled, over 20 states passed laws capping, banning, or tightly regulating rental application, late, and ancillary fees. These measures sharply reduce non-rent income streams, force deep operational changes, and accelerate a shift toward greater leasing transparency. For owners and underwriters, the new rules mean recalibrated risk, rising compliance outlays, and a new focus on base rent and tenant satisfaction as the primary drivers of value.

Vermont’s outright ban on application fees and California’s $30 screening cap headline a nationwide trend: the era of high-margin, non-rent fee stacking is ending. Colorado and Nevada have slashed late-fee thresholds and mandated fee-free rent payment options. Data shows ancillary fee income fell to 1–2% of NOI in regulated states, from 3% pre-reform (CRE360 analysis). Underwriting models now assume 0% growth in fee categories, and brokers are scrubbing pro formas to reflect new caps, refunds, and compliance expense reserves. The result: deal pricing is increasingly sensitive to even minor regulatory shifts.

Managing the “regulatory patchwork” is now a core function. Operators are budgeting 0.5–1% of NOI for legal reviews, lease updates, and software upgrades to meet state-specific mandates. Nevada requires landlords to offer at least one fee-free rent payment method; Rhode Island mandates 40 days’ notice for any new or increased fees. With late fees less effective as a deterrent, bad-debt reserves are up 0.2% of rents. Leasing teams are retrained, and new disclosure protocols must be rolled out portfolio-wide. Morning crane lines at new builds underscore that compliance can now rival construction as a cost center.

For renters, reforms mean upfront and recurring savings of $100–$300 per lease, especially in previously high-fee markets. Early returns show tenant satisfaction and renewal intent up 5–10% in regulated states, as transparency and predictability replace fee “surprises.” Underwriters have nudged renewal probabilities higher by ~2% where fee protections exist. As one operator notes, “It’s a compliance challenge, not a deal-breaker. We’d rather comply and earn goodwill than risk penalties.” Large institutional landlords absorb the changes via tech upgrades; smaller owners face a more difficult transition.

Despite the regulatory noise, capital remains committed to multifamily. Lenders are stress-testing deals with lower ancillary income, but DSCR minimums and spreads remain stable. Cap rates have widened by 5–20 bps in high-regulation markets, reflecting a modest risk premium for regulatory uncertainty. Meanwhile, multifamily loan originations are up 5% QoQ, showing that liquidity is ample and confidence in core asset fundamentals persists. Institutional investors continue to lobby for national standards to streamline compliance, but until then, diligence on state and local law is a must.

If current momentum holds, a second wave of state and possibly federal reforms could target pet, move-in, and other ancillary fees in 2026. National guidance, if it arrives, will likely seek to harmonize rather than supersede state laws. For now, underwriting must assume conservative ancillary income and rising compliance overhead, especially in major coastal and progressive metros. Amid these shifts, operators who lead in transparency and tenant communication are positioned for steadier occupancy and reputational gains. The market is moving to a new equilibrium where discipline and disclosure are priced in.

Transparency may erode easy fee income, but it builds the trust that underwrites long-term occupancy.