How deposit alternatives make moving into a rental home more affordable
Renting in the U.S. isn’t exactly cheap. As of 2019, almost half of renters in the country are considered cost-burdened, meaning they spend at least 30% of their income on rent.
But while many of the conversations around rental affordability center on monthly costs, this isn’t the only expensive involved in renting a home. In fact, in our Renter Sentiment Report, we found that almost 60% of renters have been prevented from moving into the rental homes or apartments they wanted because the up-front expenses were too high.
The largest part of these up-front expenses is the security deposit. And up until recently, paying a large cash deposit was the only option for renters looking to move into a new rental.
Now, deposit alternatives are changing the standard.
What is a deposit alternative?
As you may have guessed from the name, deposit alternatives are an alternative way for properties to protect themselves.
It’s standard practice for landlords and properties to collect a deposit (often in the amount of one month’s rent) so that if the renter causes damage or fails to pay rent, they can use those funds to make repairs or reduce their loss. Unfortunately, this deposit can be a financial burden for many renters.
With deposit alternatives, the renter pays a lower cost to a third-party provider, and the property still gets the same amount of protection against damage and missed rent.
How do deposit alternatives work?
There are a few different types of deposit alternatives on the market today, but most fall into one of two main categories: surety bonds (like Jetty!) and lease insurance.
With a surety bond product, the renter pays a one-time, non-refundable fee to a third-party provider that costs a fraction of the standard deposit amount. For example, if a property typically charges a $1,000 deposit, a renter could opt to instead purchase Jetty for $175.
In exchange, the provider will cover the property in the event that the renter fails to pay for damage or missed rent—even if the renter renews their lease or moves into a new apartment at the property.
With a lease insurance product, the renter pays an ongoing, non-refundable monthly fee to a third-party provider. For example, if a property uses a lease insurance product, each renter might pay an additional $20 with their monthly rent bill for as long as they live at that property.
Then, much like with a surety bond product, the provider will cover the property in the event that renter fails to pay for damage or missed rent.
What happens at the end of the lease?
If you’re considering purchasing a deposit alternative to lower your move-in costs, it’s important to know what happens at the end of your lease, whether you choose to move out or renew.
If you move out at the end of your lease, the property’s staff will inspect the rental home. Then, if you caused any damage beyond normal wear and tear, they’ll send you a bill for the repairs—and if you fail to pay, the deposit alternative provider will contact you to collect.
If you choose to renew your lease, the process depends on the deposit alternative you purchased. With lease insurance products, you’ll continue to pay the monthly fee indefinitely, no matter how long you stay in your rental home. With surety bond products, on the other hand, you’ll still be covered by the initial fee you paid. And if you purchased Jetty, we’ll continue covering you even if you switch units within the property.
How can you purchase a deposit alternative?
Deposit alternatives are only available at properties that partner with a third-party provider (like Jetty). But today, there are over one million rental homes in the U.S. where renters can opt to purchase a deposit alternative instead of paying a cash deposit.
If you’re looking for a new rental home and interested in using a deposit alternative to lower your move-in costs, ask the leasing team at the properties you’re considering whether they offer Jetty! If they do, you’ll be able to sign up as soon as your application is approved.