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Renters struggling to pay security deposits upfront may have new options

“I wish people knew you don't have to sell a kidney just to live in an apartment,” one renter who uses security deposit insurance said.
A demonstrator holds a sign that reads \"Cancel Rent\" during an eviction strike in the Brooklyn borough of New York on Sept. 1, 2020.
A demonstrator holds a sign that reads "Cancel Rent" during an eviction strike in the Brooklyn borough of New York on Sept. 1.Nina Westervelt / Bloomberg via Getty Images

Last June, Josh DeSon, a clinical psychology graduate student, had a choice to make: whether or not to take over the lease on his three-bedroom apartment in New York City’s Washington Heights neighborhood and be liable for the total costs as multiple roommates were losing jobs and moving out.

The Covid-19 pandemic had already driven many to leave the city and its high rents.

The apartment’s lease came with a hefty security deposit, including the first month’s rent, that totaled more than $6,000. Then DeSon learned about security deposit insurance, a service that would allow him to pay monthly, rather than the entire lump sum.

“I wish people knew you don't have to sell a kidney just to live in an apartment,” he said. “Just because you don’t have money saved up, or a family that can’t front the money, or you’re from a low-income background, it doesn't mean you can't do things.”

Local legislation and companies offering security deposit alternatives have grown in response to the increasing number of those struggling to pay their monthly rent. New legislation, referred to as “Renter’s Choice,” and companies, such as Rhino and Jetty, allow property owners to offer low-cost alternatives to lump-sum cash security deposits, giving renters the ability to choose flexible payment options.

On the legislative side, bills have already been passed in cities such as Atlanta and Cincinnati. State governors have issued executive orders in New York and New Jersey that would provide renters with alternatives.

Some elected officials, such as Los Angeles Mayor Eric Garcetti, Miami Mayor Francis Suarez, Cincinnati Mayor John Cranley and others, have also signed an open letter calling for legislation to provide renter stimulus options locally.

“High upfront moving costs can be a barrier to housing stability for many, and providing lower cost alternatives may help some families and individuals navigate a changing economic landscape,” Richmond, Virginia, Mayor Levar Stoney, who signed the letter, said in a statement.

On Monday, the Baltimore City Council voted 12-2 to pass legislation supporting alternatives to lump-sum security deposits.The bill now goes to Mayor Brandon Scott.

It has the potential to unlock $275 million now eligible to be put back into renters’ pockets, Rhino co-founder Ankur Jain said of the Baltimore legislation. He added that many lower income buildings across the country have not yet adopted such renters choice options, with 80 percent of rents still collected through checks.

“We have a large number of residents that live in poverty. Some of the statistics are we had 30,000 renters that spend more than one-third of their income on housing,” said Baltimore City Council Vice President Sharon Middleton, who introduced the legislation in January.

“I just know when we start to get better with Covid state of emergency that there’s just going to be an influx of evictions, people downsizing and looking for apartments,” she added. “I'm excited that there's now going to be options where people can choose to help any kind of financial situation.”

With Rhino, the platform replaces the traditional security deposit to a landlord and instead provides renters with a monthly low-rate insurance policy, simultaneously providing protection to property owners. It frees up money for the renter and provides the coverage that landlords require. For renters, this means paying a monthly rate for insurance that's scaled to their rent. For property owners or landlords, Rhino covers excessive damages or the loss of rent.

More than 10 million Americans are behind on rent or mortgage payments, with more than 5 million saying they are at risk of eviction or foreclosure, according to a Census Bureau survey. The Biden administration has extended a moratorium on housing evictions through the end of June. But Jain argues it’s a temporary fix.

“The challenge is once the moratorium ends, which eventually it will end, people are still racking up a lot of debt if they're not able to pay rent, which is as bad,” he said. “So it gives you temporary relief, but it doesn't solve the problem.”

Rhino’s platform, which DeSon used, seeks to free up $45 billion across the country that is currently tied up in security deposits, and turn it into stimulus for American renters, returning an average of $1,400 to renters’ pockets while simultaneously protecting the city’s property owners.

Cristy Hill of South Haven, Mississippi, a mother of three, also uses Rhino. The company’s service was offered through the apartment building she moved into during the pandemic.

“It was a blessing in disguise,” she said, adding that by using the service instead of paying for the security deposit, she saved money in the short term that went toward electric and gas, as well as setting up her new apartment.

“Nobody is mandating any sort of new way of doing things, it’s mandating choices for renters,” Jain said. “Giving options to renters to make financial decisions that are best for them is really important. Right now they have no choices.”

Rhino’s model seeks to address housing affordability by providing an insurance as a simple alternative to traditional security deposits, in which the money sits in an escrow account that neither landlords nor residents can touch by law.

Renters are still liable, however, and could still be subject to claims from their landlords for missed rent or excessive damages. Critics also point out that few cities have clear laws that govern how the process works.

Cierra Winzor, a mother of two toddlers, was displaced from her Florida home and laid off from work following Hurricane Dorian in 2019. She left Florida to stay with her mother until she could get back on her feet. She learned about money-saving alternatives when looking for an apartment in Atlanta.

“It has helped me in the long run,” said Winzor, who used the services from Rhino when signing the lease for a new apartment. She said it saved her about $2,500 upfront, allowing her to instead pay $37 monthly for the security deposit insurance.

“I was able to save that money that I would have spent on a security deposit to build my credit, get into a better financial standing,” she added. “I was able to put my kids into a nice day care and thrive from that because I was able to keep that money and do what I needed to do to be in a better financial place.”