Shelling out an extra month’s rent for a security deposit when moving into a new apartment is hard for any renter, but for those without cash on hand, it can mean the inability to move — or find housing — at all.

“Forty percent of Americans right now, their situation would be seriously imperiled by needing a spare $400,” says Cincinnati City Councilmember P.G. Sittenfeld.

That’s why, in a bill that passed the Cincinnati legislature in early 2020, Sittenfeld and his fellow councilmembers commissioned help from an unlikely source in an effort to tackle the problem together: private-sector disruptors.

New York City-based startup Rhino, founded in 2017, partners with property owners to offer tenants the option of paying the company a monthly fee — around $5 a month for a $1,000 apartment — instead of an upfront deposit, and in exchange Rhino insures the apartment against damages.

The company released a policy proposal pushing for more choice for renters in September, which has spurred action from cities like Cincinnati and, later, Atlanta.

“We’re in what a lot of people call a full blown affordability crisis,” Stein says. “There’s no silver bullet to solve this crisis, but the thing a lot of people have failed to consider over the years is upfront moving costs.”

The Cincinnati law requires owners of 25 or more rental units to offer one of three alternatives to a traditional security deposit, one of which is insurance through a company like Rhino.

Property owners can also choose to instead allow the tenant to pay the security deposit in at least six monthly payments, or they can require an upfront security deposit of no more than half of one month’s rent.

State and local representatives from Connecticut to Alabama to our very own Philadelphia Councilmembers Derek Green and Cindy Bass have publicly announced their support for bringing choice for renters to their backyards. In 2020, Bass proposed similar legislation to the one in Cincinnati; it has not yet come up for a vote.

As the Washington Post reported last month, rents in Philadelphia rose 6 percent since the pandemic started, and now average about $1,600 per month. That is significantly less than the rate of rent increase in surrounding counties, but is still a burden: A Pew housing study from 2020 found that over half of city renters spend more than 30 percent of their income on housing, what is considered “cost-burdened.” That makes staying in their apartments precarious — and moving to new ones often even more difficult.

Rhino now operates in all 50 states — and is regulated by state insurance departments in all of them — and partners with the owners of more than 400,000 units, including more than 2,000 in Philadelphia.

Tens of thousands of renters actively use the service nationwide, according to Jordan Stein, Rhino’s director of public policy. Similar companies include Jetty and The Guarantors.

Stein believes the intersection of public policy and innovation from companies like his own could move the needle on housing affordability across the country.

“More people are renting than ever before nationwide, and we’re in what a lot of people call a full-blown affordability crisis,” he says. “There’s no silver bullet to solve this crisis, but the thing a lot of people have failed to consider over the years is upfront moving costs.”

Green, who has spoken with the Rhino team in the past, thinks of one particularly vulnerable population who could benefit: “I do a lot of work with organizations like Women Against Abuse, and for some, not being able to quickly transition from a current housing situation to another and not having the resources to make that transition can be dangerous, so this concept offers that ability.”

Stein says Philly has been on the company’s radar for awhile, and they’re excited to see growth here.

“Obviously Philadelphia is a place that makes a tremendous amount of sense for us to engage with,” he says. “It’s a growing, thriving metropolitan area where affordability is clearly a tremendous issue. There’s also increasing inequality. We’re obligated to work in cities like that.”

And with homeownership on a more significant decline in Philadelphia than in almost all of the nation’s 30 largest cities, the proportion of the population it could benefit is growing steadily.

How does it work?

Here’s how it works: When a renter inquires about a unit where Rhino is an option, they can choose between the service and a traditional security deposit.

There is no approval process to be able to use Rhino — the company will cover anyone who the property owner approves to rent — but the renter’s employment status and credit score impact their monthly premium.

They receive information about that premium virtually immediately, and then can decide whether or not to pay the premium in lieu of a security deposit.

If they do, the property owner is covered by Rhino for damages up to the full amount of what the security deposit would have been.

If the landlord finds the renter damaged the apartment, they submit a claim that includes photos, and Rhino pays them. If the damage was a result of general wear and tear, Rhino foots the bill. If the damage was a result of negligence — say, a renter punched a hole in a wall — the renter owes Rhino for the claim.

According to Stein, it’s good for all involved parties: Renters can move quickly and without having spare cash on hand, while property owners lower their administrative burden and open themselves up to a wider pool of renters.

For renters in particular, the option can be life-changing, particularly in the context of the above-cited research showing that nearly 40 percent of Americans have less than $400 in cash on hand. “If a deposit is $200 for a family of four, if we’re embracing the reality of that statistic, the reality is you’re asking that family to lock up half of their savings for the duration of their lease,” says Stein.

Nersten thinks that security deposit assistance, while a positive thing, fails to address the root of the housing affordability crisis: rent is too expensive. “The security deposit issue wouldn’t be as burdensome if rent prices were controlled,” she says.

And he says the company has no target demographic for renters or property owners.

“Rhino is not expressly designed or tailored to low-income or high-income people. Rhino’s program is useful to people of all incomes for different reasons,” he says. “It’s for a young girl or guy who just graduated from Drexel or Villanova, who is making decent money but doesn’t have savings or a rich parent or uncle. Or for a family living on the margins, who may get paid on the tenth but needs the money on the ninth.”

And anyone from the owner of a sole one-bedroom basement apartment to the owner of luxury buildings and thousands of units can partner with Rhino and offer it to their tenants.

This approach to helping both sides of the equation is partially borne of Stein’s and co-founder and CEO Paraag Sarva’s professional backgrounds — Stein served as an advisor to New York City Mayor and current Democratic presidential candidate Mike Bloomberg, while Sarva managed a multi-family real estate portfolio.

“We come from a variety of angles, so we understand the challenges renters face, and we understand the challenges landlords face,” explains Stein.

It’s also good for the economy.

Rhino says data from the National Multifamily Housing Council shows $45 billion in security deposits sitting dormant in low-interest bank accounts across the country, accessible to no one and unable to spur local economic growth.

In 2019, Rhino opened up $100 million of that by providing renters with the monthly alternative.

Is this a win-win for tenants and landlords?

The Cincinnati bill faced some opposition from property owners — particularly prior to the addition of the specification that it would only apply to owners of more than 25 units, which wasn’t in the original bill — who claim that an innovative product should not be mandated in law, but instead should become widespread on its own if it proves itself a worthwhile product.

However, David Kreiser, COO of Philadelphia-area Woodlake Properties, says he sees “significant value” in Rhino services in particular, which he started using at Somerton Court Apartments in the Northeast in early 2020.

Kreiser says he feels a heightened sense of security through Rhino, because “it’s not an easy process to go to Landlord & Tenant Court” over damage disputes. Additionally, he finds the ability to expand his pool of renters to tenants he may have had to previously turn away particularly appealing.

Advocates for renters, though, harbor some skepticism. Margaret Nersten, a member of the Philadelphia Tenants Union, wonders about the value for renters, given Rhino doesn’t cover damage the tenant is at fault for, while a traditional security deposit would.

Nerstern says she believes paying the security deposit incrementally — allowed under the Cincinnati legislation — is a better option for renters, and that an insurance product could be valuable in some cases, but that she would prefer that service be provided by a government entity, not a for-profit business, and implemented federally so as to avoid potential discrimination or profit-based motive.

Nersten also thinks that security deposit assistance, while a positive thing, fails to address the root of the housing affordability crisis: rent is too expensive. “The security deposit issue wouldn’t be as burdensome if rent prices were controlled,” she says.

And of course, if you are the perfect tenant and you live in a $1,000 apartment for a year and do no damage, then you paid Rhino $60 you won’t get back — but, you didn’t have to come up with $1,000 on the spot for a deposit — a difficult or even impossible feat for many renters.

Advocates, though, maintain that as long as renters have a choice, such legislation can only do good. Many renters will see value in paying $5 a month instead of $1,000 upfront, even if they don’t get the cash back at the end of the lease.

“I can’t emphasize enough this is not something that is ever positioned as we need to abolish cash security deposits,” says Stein. “This is a choice that we think should be put in front of every renter.”

Sittenfeld agrees. “Any renter who says, I prefer the status quo of the upfront cost, they’re allowed to do that. The status quo is yours to continue with. We’ve empowered the renter with a lot of choice,” he says. “I think they’re all a big improvement, and money back in people’s pockets, but if they disagree with me, they don’t have to do any of them.”

This story originally ran in 2020. It is still an Idea We Should Steal.

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