The Long View: It’s time we finally ditch the security deposit The institution harms renters and doesn’t do landlords much good either
(Photo illustration by Lexi Pilgrim for The Real Deal)
UPDATED, Feb. 26, 2:26 p.m.: We’ve come to accept it as a fact of New York life. When we sign a lease for an apartment we might be able to escape the broker fee, we might even get a month or two of free rent, but the security deposit like death and taxes is inevita上海千花网 ble. That is finally about to change.
A small group of startups are offering alternatives to the rental apartment security deposit, and that’s great news. It’s about time we get rid of an archaic institution that saps New York’s economy of billions and hurts low-income renters.
To get a sense of how much economic damage security deposits do, here’s some back-of-the-napkin math: As of 2014 there were 848,721 market-rate rental apartments in the five boroughs, according上海龙凤论坛 to the New York City Housing and Vacancy Survey. New York’s average rent is around $3,100, according to Rent Jungle. If we assume each market-rate apartment demands one month’s rent as a deposit, that means $2.6 billion are sitting in escrow accounts at any given time. That doesn’t even include deposits for the city’s 1.03 million rent-stabilized apartments. Jetty, one of the startups selling deposit alternatives, guesstimates that around $60 billion are sitting in apartment rental deposit escrow accounts across the U.S.
In theory, the money isn’t lost: we merely put it in an escrow account and get it back at the end of our lease, ideally with interest. But in practice, we don’t. Most New Yorkers sign a new lease when their old one ends, meaning they merely hand the deposit from one landlord to the next. If they get it back at all, that is. Horror stories of landlords withholding deposits for no good reason or delaying repayment abound.
So what, a landlord might ask. Jetty’s $60 billion guesstimate isn’t that much money in the grand scheme of things a mere 0.06 percent of U.S. household wealth. Banks can lend out funds from escrow accounts, spurring investment. And the deposit has a crucial psychological benefit: a renter knows the landlord can easily withhold money for any damage to the apartment, meaning she is probably more likely to be careful when she moves f上海夜网 urniture or hammers a nail in the wall. Most landlords diligently return the deposit at lease end. Do we really need to ditch a tried and trusted institution?
The answer is yes. A $2,000 deposit means little to a millionaire, but it’s a lot of money for low-income New Yorkers who are already squeezed by rising rents. It keeps apartments just out of financial reach. It’s money that could be spent on school books, medical bills, rent itself or simply be put into a savings account. The whole point of savings is that you can spend them when you need them. A security deposit is money you can’t ever spend.
And sure, we all want to protect landlords against property damage.[……]