NYC wants to offer renters alternatives to lump-sum security deposits
Before lawmakers passed sweeping rent reform legislation in 2019, New York City renters moving to a new apartment paid a hefty lump sum, typically including an application fee, broker fee, and a security deposit. With the new law limiting application fees to $20 (and broker fees next on the chopping block), city officials are now looking to make it even easier to move into a new home. The city’s Department of Housing Preservation and Development and the Housing Development Corporation last week issued a Request for Expressions of Interest (RFEI) seeking companies that would provide alternatives to paying a security deposit all at once at city-financed affordable properties.
“Many New Yorkers are living paycheck to paycheck making it difficult to afford the high upfront costs that come with moving into a new home,” HPD Commissioner Louise Carroll said in a press release. “This administration is committed to creating better options for renters who might have trouble paying a security deposit all at once, and we’re looking for the right partners to join us in this important goal.”
The companies would let renters pay a portion of their security deposit upfront or over time instead of the full amount at the lease signing, while also insuring owners against property damage claims or unpaid rent. HPD and HDC will determine “if the products and services being offered can meet the needs of the City’s development partners and tenants” and then select providers for a pre-qualified list from which developers can choose.
According to the agencies, the providers cannot charge more than one month’s rent over a renter’s tenancy, as mandated in the Housing Stability and Tenant Protection Act of 2019.
During his 2020 State of the City address last February, Mayor Bill de Blasio called for an alternative to single-payment security deposits at nearly 60,000 city-financed homes. “Imagine if you only paid a little bit each month for all the time you were tenant, so you never had to shell out a big chunk of money,” de Blasio said in February. “There’s a law that could give you that right and you could say goodbye to security deposits.”
Last week, the mayor tweeted in support of the RFEI. “If you can make the rent, you should be able to get an apartment. Period,” he wrote.
Startup company Rhino launched in 2017 with the goal of replacing the need for single-payment security deposits and “unlocking” $190 billion in deposits for renters across the U.S. The company has already partnered with notable multi-family real estate firms like Lincoln Property Company and TF Cornerstone, among others, with Joseph Strausburg, the president of Rent Stabilization Association, serving on its “Housing Innovation Council.”
Other security deposit insurance startups that have gained attention include TheGuarantors, Jetty, and Obligo. The city is accepting responses to their initial RFEI until February 15, 2021. After the first round of reviews, applications will be accepted on a rolling basis, with the pre-qualified list of providers expected to be updated periodically, according to the city.
Comptroller Scott Stringer, who launched his 2021 mayoral bid in September, has called for an overhaul of the city’s security deposit system. In 2018, his office released a report that found New Yorkers paid more than $507 million in security deposits in 2016.