Comptroller Stringer: High Cost of Security Deposits Burden Working New Yorkers and Fuel Affordable Housing Crisis
July 15, 2018
Steep security deposits often prevent New York renters from changing apartments, moving neighborhoods, and saving for the future
Comptroller Stringer proposes security deposit-cap and highlights new strategies to put millions back into the hands of working New Yorkers
An estimated $507 million were tied up in security deposits in 2016 alone
(New York, NY) — New York City Comptroller Scott M. Stringer today called for sweeping changes to the way New York renters pay for security deposits, which have long served as a steep and unnecessary financial barrier and have intensified the city’s affordability crisis. The proposals stem from a first-of-its-kind report released by the Comptroller which showed that New York City renters sunk approximately $507 million into security deposits in 2016. The prohibitive cost of deposits can prevent struggling New Yorkers from moving to a more desirable apartment and neighborhood or force them to dig into their savings. Comptroller Stringer is recommending that New York State immediately introduce legislation to cap security deposits at one month’s rent for one-year leases, and calling on the City to explore new models to drastically reduce upfront costs for tenants but still protect property owners against legitimate wear-and-tear and rental arrears.
For New Yorkers with lower-incomes, security deposits can be extraordinarily burdensome, elevating the upfront cost of moving to a new apartment to over 20 percent of a household’s yearly income, the report found. Often, landlords require low-wage or low-credit tenants to put away multiple months’ rent in a security deposit, where the funds are placed in low- or no-interest bearing accounts and are entirely off-limits for other expenses, including emergencies. For New York City residents – whose savings rates are already among the lowest in the nation – freeing up this money for other uses would be transformative.
“Every day, New Yorkers are working harder and saving less – and right now, huge portions of their annual incomes are being held hostage in security deposits. These may just be considered the costs of being a renter in New York, but it’s not right and it’s not necessary,” said New York City Comptroller Scott M. Stringer. “To tackle our mounting affordability crisis, we need to think outside the box and put bold ideas into action. Our proposals will change the rules of the housing market and put money back in the pockets of thousands of families looking for a bigger apartment in a better school district, to new graduates who have to find a place to live while paying down their student loans. For too long, the deck has been stacked against New York’s working-class renters but we’re taking a step forward to reimagine how the housing system works in our City.”
To address these issues, Comptroller Stringer is proposing changes – many of them already in use in other cities around the nation and the world – to help level the playing field for New York City tenants.
- One-Month Cap: To ensure a level playing field for all renters, Comptroller Stringer is calling on New York State to join a growing number of states and place a cap on security deposits at one month’s rent on a one-year lease. Rent-regulated units are already protected by a one-month limit on security deposits; this proposal would expand the protection to all units within the city.
- Reducing Upfront Costs and Expanding Tenant Choices: While it is important that landlords have security against damages or unpaid rent, an upfront deposit is not the only way this can be achieved. Comptroller Stringer is proposing that City and State legislators empower tenants to manage their security deposit obligations with a range of different, opt-in strategies, including:
- Installment plans: Tenants should have the option to pay security deposits in installments rather than covering the full burden all at once. In Seattle, for instance, renters are allowed to pay in six installments, so that a tenant could add $300 to their first six rental payments, rather than paying $1,800 up-front. This installment model can also be extended to other upfront costs, like pet deposits, last month’s rent, and move-in fees.
- Insurance as an alternative to the security deposit: A number of local companies have introduced an insurance alternative in recent years. These start-ups allow renters to pay a small monthly or one-time fee in exchange for guaranteeing their security deposit with landlords. While tenants will not receive this money back – as they would with a traditional deposit – paying $10 per month to insure your apartment against damages rather than an $1,800 security deposit is a significant reduction in the upfront costs of moving and can be a desirable trade-off. Moreover, tenants who have already paid their security deposits can request that it be returned and can switch to the monthly payment, insurance model instead.
- Maintaining the status quo: Likewise, if a tenant prefers to pay a full month’s security deposit with a single check, that option should be preserved and protected.
- Getting back the security deposit: Too often, security deposits are withheld from tenants at the end of a lease for arbitrary, unexplained, or fraudulent reasons. To combat bad actors and ensure fairer outcomes, New York City can follow the lead of England and create a tenant protection system where security deposits are held by a third-party custodian and arbiter rather than the landlord.
- If the landlord wishes to withhold money for damages, cleaning fees, or unpaid rent at the end of a lease, they must come to an agreement with the tenant. In instances where there is a dispute over damages or the cost of repairs, the landlord and tenant can utilize the dispute resolution service run by the third-party organizations that hold deposits. These services cost nothing but require both parties to agree to be bound by the decision.
Stringer’s report includes a deeper analysis of how security deposits impact New Yorkers across the boroughs, finding that with minimal savings and rising rents, the growing upfront costs of security deposits combined with first month’s rent in communities like East Harlem, Chinatown, and the Lower East Side can run up to 15 percent of a family’s annual income. In fact, in fifteen areas throughout the city, the typical family would pay more than 10 percent of their annual income to afford the first month’s rent and security deposit of an apartment in their community districts.
And for New Yorkers considering moving out of their neighborhood, the growing upfront cost of security deposits can make choosing better housing options next to impossible. For the median family in the city’s ten poorest neighborhoods, a typical New York City apartment and the associated security deposit can cost an extraordinary 22 percent of annual income. Moreover, low-income New Yorkers are often painted as risky, and targeted by landlords to deposit multiple months of rent for security.
In announcing this proposal, the Comptroller was joined by advocates supportive of the plan.
“Upfront housing costs, such as security deposits, brokers’ fees and first and last month rent can total thousands of dollars, which puts housing in a good community out of reach for too many middle and working class New Yorkers,” said Assemblymember Linda B. Rosenthal. “I applaud New York City Comptroller Scott M. Stringer for identifying creative solutions to the affordable housing crisis that will help get hardworking New York families into homes in New York City, and I look forward to continuing our work together to make New York more affordable to all.”
“Our clients spend huge portions of their incomes on security deposits sacrificing groceries, medicine, and other necessities,” said Judith Goldiner, Attorney-In-Charge of the Civil Law Reform Unit at The Legal Aid Society. “Moreover, the road to getting back one’s deposit back isn’t a guarantee either, and unscrupulous landlords look for any opportunity to profit off our clients and pocket the security deposit at the end of the lease. The Legal Aid Society lauds New York City Comptroller for examining this issue and these proposals that would serve as a game changer for many.”
“Steep security deposits on top of soaring rents make it that much harder for low-income New Yorkers to be able to afford to move,” said David R. Jones, CEO and President of the Community Service Society, a leading anti-poverty group. “The security deposit cap and other smart new ideas being put forward today by Comptroller Scott Stringer would help address one of the barriers preventing New Yorkers from finding a better place for their families to live. Our annual Unheard Third survey found that two-thirds of low-income households say they cannot afford to move within their borough. Moreover, seven in ten reported savings of less than $1,000, so a hefty security deposit could leave them with nothing to fall back on if a medical emergency or another crisis hits, and more at risk of rent arrears, eviction and homelessness.”
To read the Comptroller’s full report, click here.