Last month, on Dec. 30, the New York City Department of Housing Preservation and Development (HPD) and New York City Housing Development Corporation (HDC) announced they were soliciting submissions from companies which could come up with alternative ways of helping renters in City and HDC-sponsored affordable housing to pay their required security deposits when signing a lease.

 

The Security Deposit Alternatives RFEI program identifies eligible companies that could potentially offer alternate solutions to the traditional, lump-sum deposit requirement which plagues many low and medium-income renters.

 

The program is part of the City’s broader plan to create alternate ways to help renters pay the required security deposits, and make it easier for them to access affordable housing when they need to, starting with City-financed homes. The measure is one of Mayor Bill de Blasio’s “State of the City 2020” commitments to ensuring that money that used to go on security deposits can, instead, be put back into the pockets of New Yorkers.

 

“Many New Yorkers are living paycheck to paycheck making it difficult to afford the high, upfront costs that come with moving into a new home,” said HPD Commissioner Louise Carroll. “This administration is committed to creating better options for renters who might have trouble paying a security deposit all at once, and we’re looking for the right partners to join us in this important goal.”

 

Meanwhile, HDC President Eric Enderlin said, “Security deposits create barriers to mobility for too many New Yorkers. Providing alternatives to these burdensome requirements is an important step towards creating a fairer and more equitable city.” He added, “We look forward to advancing this initiative to make it easier to obtain a safe, secure, and affordable home.”

 

Security deposit alternatives are financial products/services that allow renters to pay a portion of the required security deposit value, instead of the full amount at the time of lease sign-up. The obligation to come up with the traditional, lump-sum security deposit has long presented barriers to many low and middle-income households, preventing them, often at the most inopportune moments, from relocating to new housing.

 

Under the program, HPD and HDC will determine if the alternative financial products/services offered by the slate of potential providers meet the needs of the City’s housing development partners (property owners and property managers) as well as the needs of the tenants, in terms of security and risk assessment. If they do, the City will consider placing any vetted providers on a pre-qualified list. These partners can then consider if they wish to work with the vetted financial providers or not.

 

Under the terms of the RFEI, providers of the alternative financial products cannot charge renters more than one month’s rent over the duration of a renter’s tenancy. They must also allow renters to pay a small portion of their security deposit up front, or the full amount over time, while the providers themselves insure the property owners / property managers against any property damage claims or unpaid rent, among other requirements.

 

Norwood News had a number of questions about the program and reached out for clarification to HPD. We asked if solicitations from providers for acceptance onto the initial, pre-qualified list were to be received only from regulated financial service providers or from any type of company. A HPD representative said in order to be considered for the pre-qualified list, applicant providers must provide a copy of their insurance license issued by the New York State Department of Financial Services.

 

We also asked, for the avoidance of doubt, if it is the provider of the new security deposit alternative product/service that will insure the development partner/property owner against “property damage claims or unpaid rent, among other requirements”, and we asked what those “other requirements” were.

 

The HPD representative replied, “We understand that most security deposit alternative providers cover [property] owners [and not the tenants] for any property damage or unpaid rent on the part of the tenant. However, all proposals will be considered.” HPD said the “other requirements” are detailed in the threshold criteria and scoring criteria listed on pages 3 to 4 of the RFEI, found here.

 

The HPD site outlines that the program is open to renters leasing newly constructed “City and/or HDC-sponsored affordable housing.” Since HDC is a City agency, we asked what the difference was in this regard.

 

The representative said, “HDC is a state-chartered, public benefit corporation that serves New York City and works very closely with the City government. This sentence is intended to make it clear that HDC-financed new construction rental projects may use security deposit alternative products pre-qualified through the RFEI.”

 

In terms of the timing of the program, the HPD representative clarified that pre-qualified security deposit alternative products, identified through this RFEI, will be available to both City and HDC-financed new construction rental projects at the same time.

 

Finally, we asked HPD which government or State agency will regulate the providers of the new security deposit alternative product/service, in order to ensure tenants are protected against any predatory entities. We were informed that the State, through the Department of Financial Services, will continue to regulate security deposit alternative providers in accordance with State law.

 

HPD added that once the initial pre-qualified list of security deposit alternative providers is identified, HPD and HDC will have the ability to remove any provider from the pre-qualified list if they are no longer in compliance with the RFEI criteria, or if they do not comply with HPD and HDC requests for data/information about the activities in their portfolios.

 

To be considered for the initial pre-qualified list, companies should send their submissions, in a single PDF attachment, to securitydeposits@hpd.nyc.gov by Feb. 15, 2021. More information about the RFEI program can be found on HPD’s website here.