Tackling the issue of affordable housing is a complex task for local leaders, from Washington to San Francisco and everywhere in between. Though each city has its unique problems, across the country there is one common roadblock to affordable housing that is often overlooked: the burdensome cash security deposit. In a place like D.C., where the median rent is still north of $1,800 even after the market turned down, an upfront cash security deposit equal to a month’s rent is cost-prohibitive for far too many renters.
As local leaders, we’ve adopted a common-sense policy approach that expands the accessibility of housing for renters quickly and for the long haul, while providing a vital shot in the arm for the financial health of our cities. To help our communities round the corner on the pandemic and address housing accessibility, we all came to the same conclusion: It’s time to transform the traditional cash security deposit. We strongly encourage cities across the country to do the same.
The traditional security deposit effectively doubles the upfront cost of renting, which makes too many apartments inaccessible for families and individuals without significant savings. Nationwide, there is more than $45 billion worth of security deposits sitting in escrow accounts. In just our three cities of Baltimore, Atlanta and Cincinnati, more than $1.1 billion could be unleashed for economic development, stabilizing our citizens’ personal finances. That’s money better spent on child care, quality health care, patronizing a struggling local business or saving for a future emergency.
One of our primary initiatives to better serve our citizens is “Renter’s Choice” legislation, a policy we pioneered in our cities. To tackle the upfront costs of renting — which remains an obstacle for more than one in three renters — the law requires property owners to offer a menu of low-cost alternatives to the burden of a full-cash deposit, either insurance or an installment payment plan. Rather than being forced to pay a lump sum upfront, renters can take out an insurance policy for as little as a few dollars per month. These programs significantly lower the barriers to entry for renters, ensure property owners stay protected against excessive damages and unpaid rent and represent the best example of how collaboration between public-policy focused entrepreneurship and responsive local governments can address systemic challenges.
Renters like Erica Goodridge, an administrator for the city of Baltimore, have experienced the financial impact that “Renter’s Choice” legislation can make for single parents when moving into a new home. When Goodridge moved out of her three-bedroom townhouse after a divorce, she was financially unstable and in need of a new home for herself and her children. When applying for a lease, she was asked to pay a $3,100 security deposit in addition to her first month’s rent. Through an insurance plan, she was able to pay a fraction of that cost at move-in and use the money she saved to pay her first month’s rent plus moving expenses. Four in 10 Americans do not have the money available to deal with an emergency expense of $400, and the money saved through alternatives to security deposits in one of life’s most vulnerable transitions opens up new, more affordable housing options for millions of renters.
The relief offered by Renter’s Choice is about more than just economic activity; it’s about ensuring our families, neighbors and friends can all equitably access safe shelter. This legislation isn’t just a bandage in a difficult time; it’s a fundamental shift that will put stable and secure housing within reach for more people, permanently.
Mayors, county officials and city council members across the country, but particularly in majority-renter cities such as D.C., must take action in our respective communities and work to solve the housing crisis on a local level. Renters Choice legislation is a shining example of what can happen when the public and private sectors come together to tackle structural challenges. Housing is a complex, multifaceted issue, but there are cost-effective, win-win policies that benefit property owners and renters alike.
If local leaders have any doubts, look to our results. Renter’s Choice legislation is one of the best examples today of private-sector innovations leading to public-sector solutions. It benefits our constituents — particularly those who need help the most — without hurting property owners or our economies. It is a common-sense solution that we fervently hope more cities around the country explore. It is vital that we solve this issue that has affected Americans for far too long.