Could Ditching Security Deposits Increase Rental Costs?

January 22, 2020

One big trend in rentals lately has been to eliminate security deposits that require tenants to pay a large payment up front. But now some housing analysts say that efforts to encode the practice into law could wind up costing renters more money in the long run.

National Real Estate Investors Association COO Charles Tassell told Fox Business that several efforts by legislators around the country to do away with security deposits through “misguided feel-good” laws could have long-term implications on renters.

“Either the rents go up or the standards for renting go up, which means people on the margins are less likely to be able to rent,” Tassell says. “In short, what [owners] are gong to do is … protect their assets.”

Lawmakers across the country are increasingly eyeing security deposits. For example, in Cincinnati, a new law took effect that gives renters the option to pay with a cash alternative, split payments over six months, or opt for security deposit insurance.

But security deposit insurance may be appealing to some renters because of their low initial payments. Tassell, however, cautions against it. Renters “don’t want to pay $500 up front, so they pay $3, $5, $10 every month,” he says. “And when they move out, the company is going to come back and say, ‘Hey, you need to pay for the $300 of damages.’”