Rent and affordability has been top of mind during this pandemic.
With so many workers getting laid off, many are having to make tough decisions about where and how to live.
When renting an apartment, those decisions can be even more difficult. On average, security deposits are about one to two months of rent, but half of all families in the U.S. have less than $400 set aside, according to the Federal Reserve.
Paying a security deposit upfront is a major burden for some.
“Security deposits can deter households from renting, creating an additional barrier for low-income renters. And that’s on top of other landlord screening practices and discrimination, which can also keep people out of rental housing,” said Sophie House with the Housing Solutions Lab at the NYU Furman Center.
That's why advocates are coming up with more affordable ways to secure a deposit, while still giving landlords that financial protection.
Legislation known as "renter’s choice" has been passed in some places like Atlanta, New York state and New Jersey. It gives renters the option of choosing payment options instead of having to pay a large security deposit. Rhino and Jetty are some companies that offer these alternatives.
Let's take the national average for deposits. It's about $1,700. With one of these plans, renters can end up paying $9 a month on top of rent. Or you can pay that insurance in a lump sum and it still turns out more affordable than the traditional security deposit.
But because plans are still relatively new and not mainstream, there really aren't regulations yet.
“Anytime there’s a new financial product, especially one that’s targeted towards lower income households, you want to make sure that the right protections are in place and you need to make sure that there’s transparency about how the models work and transparency about things like fees,” said House.
Experts at the Housing Solutions Lab say it's likely we'll start seeing more regulation on these plans as they become more common.
Leaders in more than 20 states have already expressed support for legislation that would allow for this renting alternative.