ORLANDO, Fla. — As renters face record-high rents across Florida, a new way to avoid putting down a hefty security deposit upfront is gaining popularity.
Alternative security deposits are monthly fees that replace what can be more than two months of rent paid in advance.
A bill working its way through the Florida Legislature seeks to codify them, potentially expanding alternative security deposits as an option for the majority of rental properties.
But some housing advocates argue that alternative payments lock renters into contracts that don’t offer the security of a deposit and can damage renters’ credit, making it harder for them to get housing in the future.
“It’s one thing to owe your landlord money,” said Kevin Rabin, director of litigation at the federally funded Three Rivers Legal Services in Gainesville. “But when another company hits you for debts you owe, that’s going to bury your credit even further.”
The basic premise works like this: Instead of charging a regular deposit, the landlord signs a contract with a third party to take a monthly fee instead. That company then insures the landlord against any damages the tenant might cause to the apartment.
“The whole idea of security deposit alternatives is to minimize out-of-pocket costs for people moving into new homes,” said Orlando native Brian Ball, CEO of Qira, a financial tech company that offers alternative security deposits.
Ball says that for the average rent range that they work with of between $1,700 and $2,500 per month, the fee is typically about $20 a month.
The difference between that and a traditional security deposit is that Qira and other similar companies can collect additional money from the tenant for any damages to the rental unit when they move out.
“It’s not pre-payment for damages,” Ball said. “It’s the fee for the convenience of not having to come up with a deposit in the first place.”
Rabin said that could end up costing the renter more.
“It effectively leaves them on the hook for whatever damages the landlord claims,” he said. “Now it’s not one company they owe money to; it’s two.”
Both the landlord and the deposit company can report the money a tenant owes to credit agencies and consumer reporting agencies, which can make it harder if not impossible for the tenant to find someone else willing to rent to them, Rabin said.
“[Landlords] are either going to deny them housing or ask for even more money upfront,” he said.
Rabin says these services aren’t really for tenants. “All their advertising is to property managers,” he said. “That maybe suggests something about what the product is and what its real purpose is.”
Ball says his company does provide a service to property managers who don’t have to worry about collecting money for property damage from tenants anymore.
He said his company works with several clients in Florida, including All County CFL Property Management in Orlando, which advertises the alternative security deposit on its website.
Reshard Battle, general manager for All County, said his agents don’t push tenants into the arrangement.
“We only mention it if someone says they might have trouble with a deposit,” he said.
Florida has laws that dictate how security deposits are to be collected and returned that don’t allow for third-party agreements, Rabin said.
But Rep. Jim Mooney, R-Islamorada, says the companies are already operating legally in the state, just without regulation.
Mooney is the sponsor of HB 133, a bill that would spell out those rules. The sponsor of a similar bill last year that failed to clear the Senate,
Mooney said the new bill, which could be voted on in the House soon, installs what he called “guardrails” to protect consumers.
He frames his bill as providing renters with a choice, not a mandate. “No one is holding anyone’s hand in the fire to do this,” he said.
Rep. Anna Eskamani, D-Orlando, said the appearance of choice is illusory for low-income workers in the state. “If you are poor, you have no choice to but to take this option,” she said.
The bill would force landlords to tell tenants about the option, which Eskamani says could have the effect of making them feel like the only alternative.
“A never-ending fee compared to paying $2,000 up front is, for many people, potentially cheaper, but if I don’t have $2,000 and the legislature has offered no caps on security deposits, then. of course. I’m going to choose a perpetual fee,” she said.
Mooney said the disclosure requirements are in the interest of consumers, making sure they are aware of alternatives.
Around the county, alternative security deposits have been controversial. A bill to allow them in Baltimore in 2021 was vetoed by the city’s mayor, who said he “could not ignore” the concerns of activists.
Eskamani said she would prefer putting caps on security deposits, allowing them to be paid in increments over time, and even letting renters benefit if the landlord invests the security deposit while it is in escrow.
Mooney says that his bill will make housing more accessible overall. “This is an opportunity for people to get into a place quicker or in a better location, closer to better schools or work,” he said.
But Eskamani sees it as one more way companies have found to profit off struggling renters.
“Instead of profiting off of housing insecurity, let’s just strengthen consumer protections so it’s not expensive to be poor,” she said.
