Security Deposit Alternatives Leave Renters Paying More: Report

May 26, 2026

A National Consumer Law Center report reveals that security deposit alternative programs marketed by property technology companies are harming renters financially while circumventing tenant protection laws. These programs require renters to pay nonrefundable monthly or annual fees to third-party companies instead of traditional refundable deposits, often resulting in tenants paying significantly more over time while remaining liable for damage claims and debt collection. The issue particularly impacts Black and Latino renters who already face disproportionate housing cost burdens, with companies using credit scores and algorithms that may deepen racial disparities.

Who is affected

Renters across the country, including in Washington D.C.
Tenants with low incomes
Black and Latino renters (57% of Black renters and 54% of Hispanic renters are cost-burdened)
Households of color who face discriminatory tenant screening systems
Tenants using services from companies including Rhino, Jetty, LeaseLock, Obligo, and TheGuarantors

What action is being taken

Landlords are marketing security deposit alternative programs as substitutes for traditional deposits
Third-party PropTech companies are collecting nonrefundable monthly or annual fees from tenants
Companies are pursuing tenants for damages or unpaid rent through debt collection efforts
Companies are conducting automatic bank withdrawals based on landlord damage claims
Companies are using credit scores, banking history, and proprietary algorithms to determine tenant pricing

Why it matters

This issue matters because these alternative products strip away legal protections that traditional security deposit laws provide to renters, particularly in jurisdictions like D.C. where specific tenant protections exist. The programs disproportionately burden low-income renters and communities of color who already face housing cost challenges, while generating profits for PropTech companies at tenants' expense. Tenants end up paying substantially more through nonrefundable fees while remaining liable for damages, making renting more expensive and creating additional financial hardships including overdraft fees from automatic withdrawals.

What's next

State and local governments are being urged to strengthen oversight of the security deposit alternative industry
Advocacy groups are calling for requirements that landlords continue accepting traditional security deposits
Local governments are being encouraged to increase access to traditional security deposits and increase enforcement of existing laws
Regulatory action is recommended to prohibit abusive practices by landlords and security deposit alternative companies

Read full article from source: The Washington Informer