As 2021 unfolds, and life outside of my four walls feels possible, I’ve been thinking more and more about the pace of change we’re experiencing. In spite of and because of the pandemic, security deposit alternatives have exploded, accelerating the end of traditional cash deposits more quickly than even I would have suggested possible.
It feels unprecedented that something as ubiquitous as the cash deposit, which was the status quo for 43 million rental transactions, is being replaced by new technologies that create a better way of securing a home — plain and simple.
In just three short years, deposit alternatives have gone from an interesting concept/nice-to-have amenity to a center-stage product that’s unlocking the $45 billion held in cash security deposits all across the country. And there’s now a clear path emerging for the 110 million US renters to take back their cash and have more choices at move-in on how to spend it. So far, our industry has seen:
Over $300 million saved for renters nationally, with the industry on track to give back more than double that to renters this year alone;
Adoption of deposit alternatives by landlords and property managers of millions of rental doors nationwide; and
Mayors and legislators stepping into the fore, passing landmark legislation in major metros like Baltimore, Atlanta, and Cincinnati, and advocating for broad, equal access to deposit alternatives.
And that last point really can’t be overstated — sometimes it feels almost miraculous, that at a time when the gridlock in Washington, D.C. appears to have reached new heights, we’ve actually seen bipartisan cooperation at the state and local levels to support legislation on deposit alternatives.
As deposit alternatives start becoming the norm, we shouldn’t lose sight of where innovation can run afoul of its original intent. As I watch, and participate in, this industry’s transformation from the inside out, I feel compelled to highlight a few principles that I think get at the heart of consumer protection and advocacy for renters in this space.
Transparency and Choice
Renters should know what they’re paying for. It should be clear and upfront — not buried in the back of a 25-page lease. And renters should have more choices, not less. Want to learn about a deposit alternative and choose that? Great. Want to pay a cash deposit? That’s fine too. Forcing renters to buy insurance or tricking them into it doesn’t make sense.
Deposit alternatives are exactly what they sound like, alternative ways to secure a lease in place of paying a cash deposit. One thing I’ve seen that can lead to predatory prices for renters are deposit alternatives that force renters to buy coverage that is 5-20x higher than a cash security deposit would be for that same renter. In those cases, renters could pay 30% more in non-refundable premiums than they would if they chose a refundable cash security deposit, which defeats the purpose of the low-cost, affordable premiums that make deposit alternatives so impactful.
Coverage limits should be capped at the equivalent cash deposit option and shouldn’t be a way to squeeze more money from a renter. Thankfully, we’ve already seen coverage limit mandates included by lawmakers in Renter’s Choice legislation because it’s obvious that low-income and minority renters may be disproportionately impacted through these schemes.
No hidden fees
Premiums and fees paid by renters should cover the cost of the insurance to secure their lease — nothing more. Tacking on additional, hidden fees just drives up the cost of renting for people and has a disparate impact on at-risk renters. If there’s a reason for an additional charge, it should be clear and transparent.
The day when people laugh at the idea of ever paying a security deposit is getting closer as the pace of adoption and change continues to accelerate. If we remain focused on our end goal of helping consumers by lowering the upfront costs of renting, we have the opportunity to create massive change and unlock $45 billion for Americans at a time when the average family doesn’t even have $400 in savings for an emergency.
Between common-sense legislation like Renter’s Choice, leadership from renter advocates, and thoughtfulness about these core consumer principles, we can change renting in America. The opportunity is right in front of us.