Security Deposits: Policy Issue
Overview
In general, a rental housing provider will ask for one to two months’ rent as a security deposit when a resident signs a lease to cover the costs of any potential repairs or outstanding rent payments when a tenancy ends.
Some state and local lawmakers are considering laws that unnecessarily restrain security deposits assessed by housing providers and how they are collected, stored, withheld or refunded.
This includes “renters’ choice” legislation, which requires housing providers to accept an unproven security deposit alternative that hinders their ability to mitigate against the risk of nonpayment of rent or property damage.
Industry Position
Security deposit laws must preserve the ability of housing providers to manage their risk using strategies that best fit the unique needs of their communities and residents. The National Apartment Association (NAA) opposes proposals that overly prescribe or mandate security deposit policies, products or services. Rather than imposing arbitrary requirements on security deposits, lawmakers should seek to expand security deposit flexibility and increase options for housing providers.
As an Owner or Operator, How Does this Affect My Business?
Security deposits are an essential aspect of the leasing process that allow rental housing providers to manage risk in their business and provide residents with a stake in the condition of their apartment. There is a complicated patchwork of state and local laws governing all aspects of security deposits. Failure to adhere to security deposit laws can result in financial penalties of two to three times the deposit amount.
The market for alternatives to traditional security deposits, like surety bonds or insurance products, is growing rapidly and some providers may offer a solution at their communities to help residents with up-front costs. Mandating these alternatives in practice, however, often results in housing providers’ increased reliance on resident screening criteria as they look for alternative methods of managing risk, which harms low- and moderate-income renters who have insufficient, unscorable or poor credit history.
Contact Information
To learn more about this issue, please contact NAA's Public Policy team.