NYC Apartment Operators Scramble for Solutions to Looming Security Deposit Regulations
The writing is on the wall: if some city leaders have their way, New York City will follow the lead of Seattle and impose strict new regulations around security deposits, which they say are creating a financial burden that unduly limits the ability of the city’s renters to move to new or better places.
This has apartment owners and managers anxiously searching for answers to their own impending burdens: increased financial risk, along with deposit management headaches.
City Comptroller Scott Stringer has released a set of proposals that include the following:
- A security deposit cap of one month’s rent on a one-year lease
- An option to pay the security deposit in installments
- Insurance as an option to a deposit (a modest, non-refundable payment for insurance in lieu of an up-front cash deposit)
- New regulations around the withholding of deposits at the end of a lease (involving third-party fund custodians and dispute resolution)
Apartment owners and managers look to automated solutions
Tom Schickel, head of RealPage Software’s DepositIQ division, says the regulations will cause major headaches for apartment managers who don’t have a solution in place before they’re enacted.
“There’s a range of problems you could encounter if you don’t get out ahead of this,” he says. “You potentially put yourself at financial risk; you could face sanctions or lawsuits if you violate the regulations; and then there’s the burden of managing the deposits, when the last thing landlords need is another time-consuming and potentially confusing administrative task.”
To address these issues, DepositIQ offers a security deposit alternative in place of a refundable cash deposit. “The burden is lifted from the property managers,” says Schickel. “Deposit alternatives are built into your leasing workflow, so there’s no need to worry about not complying or leaving a hole that exposes you to financial loss due to new regulations. DepositIQ administers the entire program.”
“It’s about outsourcing a big hassle to a company that specializes in this,” he explains. “You’re in the business of getting apartments leased, taking care of residents and growing your business— not complex deposit management that requires ongoing and time-consuming oversight.”
Lemons into lemonade: a marketing opportunity
Schickel says the new regulations are actually bringing attention to an exciting marketing opportunity for apartment owners. “Even if there were no regulations coming, these deposit alternatives are really attractive to most renters, and you can use them as a marketing enticement,” he says. “It’s not just low-income folks but also well-off renters who don’t want to tie up a bunch of cash in a security deposit.”
He adds that owners also appreciate the extra level of protection the security deposit alternative provides to cover loss of rent and damages.
DepositIQ has been successful with its security deposit alternatives even in markets without regulations. Schickel explains: “You can see a deposit alternative program like ours as a smart answer to regulations, but frankly it’s been very popular even in markets with no regulations, because you can advertise and offer a low-cost move-in option without sacrificing asset protection.”
Though DepositIQ is owned by RealPage Software, the program can be used with any property management software solution, and is currently integrated with On-Site, Yardi, ResMan and others. “You don’t have to be a RealPage user, but you’re still benefiting from the expertise of the country’s largest rental property software provider,” says Schickel.
For more information about DepositIQ or New York City’s deposit regulation proposals, please click here now.