{"id":150779,"date":"2021-05-05T18:35:32","date_gmt":"2021-05-05T18:35:32","guid":{"rendered":"https:\/\/theintercept.com\/?p=355049"},"modified":"2021-05-05T18:35:32","modified_gmt":"2021-05-05T18:35:32","slug":"startup-alternative-to-rental-security-deposits-gets-legal-backing-in-baltimore","status":"publish","type":"post","link":"https:\/\/radiofree.asia\/2021\/05\/05\/startup-alternative-to-rental-security-deposits-gets-legal-backing-in-baltimore\/","title":{"rendered":"Startup Alternative to Rental Security Deposits Gets Legal Backing in Baltimore"},"content":{"rendered":"

A new bill<\/u> in Baltimore <\/span>passed<\/span><\/a> the City Council last month, promising to address the problem of high security deposits for renters while being met with objections\u00a0from local housing and tenant groups. Mirroring similar statutes that have passed recently in two other cities, the bill requires Baltimore landlords to offer alternatives to the traditional security deposit. If tenants can\u2019t or don\u2019t want to pay a lump sum up front, landlords must offer one of two alternatives: either pay the regular deposit in three monthly installments or purchase so-called rental security insurance.<\/span><\/p>\n

The bill doesn\u2019t specifically name Rhino, a real estate startup that launched in 2017, but it\u2019s widely understood that \u201csecurity insurance\u201d refers to a financial product that Rhino promotes. The product allows tenants to pay a small monthly nonrefundable fee in lieu of a large refundable security deposit. The average Baltimore deposit is $1,000, and a typical Rhino policy for that would be about $5 per month.<\/p>\n

Local housing groups in Baltimore say they support the idea of offering three monthly installments as an alternative, but virtually all housing activists in the city have concerns about the Rhino insurance model. Lawmakers rejected an amendment introduced by Ryan Dorsey, one of just two council members to vote against the legislation, to take the Rhino option out of the bill.<\/p>\n

<\/div>\n

The local outlet the Baltimore Brew reported<\/a> that Rhino lobbied for the legislation and arranged for two council members, including the bill\u2019s primary sponsor, Council Vice-President Sharon Green Middleton, <\/span>to speak on Rhino-hosted<\/span><\/a> housing roundtables<\/span><\/a>. (Middleton did not return The Intercept’s requests for comment.) Jordan Stein, Rhino\u2019s head of public policy and a\u00a0onetime assistant in former New York City Mayor Michael Bloomberg\u2019s administration, registered as a<\/span> city <\/span>lobbyist<\/span><\/a> on March 29, two days after the Baltimore Brew article was published<\/span>.<\/span><\/p>\n

The bill is heralded as \u201cgiving renters choice,\u201d but the legislative text gives the ability to pick between monthly installments or Rhino to the landlord, not the tenant. Landlords nationwide dislike monthly installment options, typically viewing them as too risky.<\/p>\n

The bill is now on the mayor\u2019s desk. In <\/span>a letter<\/span><\/a> sent to Mayor Brandon Scott and the City Council, the Baltimore Renters United coalition urged a veto, calling the bill predatory and warning of unanticipated costs for tenants down the line. Under the Rhino model, the company promises to cover the landlord\u2019s risk up to the value of the deposit, and if a landlord files claims for excessive damage on top of that or for unpaid rent that Rhino deems legitimate, then the company will pay the landlord and seek reimbursement from the renter. Rhino co-founder Ankur Jain told The Intercept that it would never sue a renter for those costs and that if a renter defaults on their bill, the company will simply take a loss, but Rhino\u2019s<\/span> tenant agreement form<\/span><\/a>\u00a0warns that failure to repay could hurt the tenant\u2019s credit score and their ability to find housing or obtain any kind of insurance in the future. (Scott\u2019s office did not return multiple requests for comment.)<\/span><\/p>\n

The Baltimore Sun editorial board <\/span>has urged<\/a><\/span> the mayor to sign the legislation, arguing that renters may even be more protected from false landlord claims with Rhino and that \u201cthe important thing <\/span>is, they will have choices.\u201d<\/span><\/p>\n

Less than two weeks after the council passed the law, Middleton <\/span>co-authored an op-ed<\/span><\/a> in the Washington Post with a city council member from Atlanta and the mayor of Cincinnati, the two other cities that have adopted the legislation, in which they \u201c<\/span>strongly encourage cities across the country\u201d to follow suit.\u00a0<\/span><\/p>\n

\u201cIf local leaders have any doubts, look to our results,\u201d they write. \u201cRenter\u2019s Choice legislation is one of the best examples today of private-sector innovations leading to public-sector solutions.\u201d<\/span><\/p>\n

In December, CNN Business published a piece<\/a>\u00a0with a similar stance,<\/span>\u00a0in which Los Angeles Mayor Eric Garcetti, Miami Mayor Francis Suarez, and Jain argued together that pushing more “renter\u2019s choice” bills would unlock funds from security deposits and provide immediate relief to tenants. \u201c<\/span>While the federal government continues to delay, we’re bringing about the single largest rent relief initiative in the country,<\/span>\u201d they claimed. Tenant advocates in Miami<\/span> immediately blasted<\/span><\/a> the op-ed.<\/span><\/p>\n

“Just like subprime loans, they may result in financial ruin. \u2026 As always, the people who will be most hurt by this are financially vulnerable Baltimoreans, who are mostly Black and brown.”<\/blockquote>\n

Lawmakers in at least\u00a010 other states have<\/span> announced their intent<\/span><\/a> to pursue similar bills, despite little evaluation of how the nascent laws have worked. (Rhino says\u00a01 million renters use their insurance nationwide.) In an open letter, a coalition of supportive politicians linked to a petition hosted by Kairos, a venture capital firm that backs Rhino and which Jain also co-founded.<\/span> Both supporters and detractors say they\u2019re looking to prioritize the needs of low-income, vulnerable renters.<\/span><\/p>\n

\u201c<\/span>Many of the people who will benefit from this legislation are seniors and Black and Latina women raising children,\u201d Middleton wrote on Facebook. \u201c[The bill] is about equity and confronting homelessness in a city where 70% of our neighbors without housing are Black.\u201d<\/span><\/p>\n

Zeke Cohen, the other Baltimore council member to vote against the bill, noted that his city was ground zero for the subprime mortgage crisis. The Rhino bonds \u201chave a similar logic,\u201d he told The Intercept. \u201cThey get tenants into housing quickly without the need for a security deposit. But just like subprime loans, they may result in financial ruin. \u2026 As always, the people who will be most hurt by this are financially vulnerable Baltimoreans, who are mostly Black and brown.”<\/span><\/p>\n

\n\"Ankur\n

Ankur Jain, co-founder of Rhino, onstage at Web Summit in Dublin on Nov. 4, 2015.<\/p>\n

\nPhoto: Stephen McCarthy\/Corbis\/Sportsfile via Getty Images<\/p><\/div>\n

Jain, the Rhino co-founder,<\/u> is a <\/span>well-connected young entrepreneur<\/span><\/a> who formerly worked as a\u00a0vice president for Tinder. In an interview, Jain insisted that his goal was to ease the burden on renters.<\/span><\/p>\n

\u201cWe look at the opportunity cost and the loss of <\/span>flexibility from locking away that hard-earned money in an escrow account,\u201d he said. “Someone might decide it\u2019s better for them to have super low monthly premiums [instead of a security deposit] and use that money to pay off debt or interest payments or put it in the stock market where it can have a higher return.” Rhino and its supporters have been calling this idea a \u201cstimulus\u201d since it would free up funds an individual could theoretically spend.<\/span><\/p>\n

In 2019, Rhino released a \u201cRenter Choice and Flexibility Plan\u201d<\/span> on Medium<\/span><\/a>, calling to \u201cunleash\u201d $45 billion in security deposit funds sitting in escrow accounts by 2021. Since it is not mandatory in most cities for landlords to offer security deposit alternatives like Rhino, many don\u2019t. Rhino\u2019s political strategy, then, has been to persuade elected officials to require it.<\/span><\/p>\n

Jain said that by requiring landlords to make it an option,\u00a0the company is\u00a0helping ensure that lower-income tenants can take advantage. “If you go to most major cities, most high-rises already offer products like Rhino because it\u2019s become a market standard,\u201d he said. \u201cBut landlords operating smaller buildings don\u2019t always offer alternatives, so these types of policies are designed to create more equitable access.\u201d (Other competitors offering Rhino-like products include <\/span>LeaseLock<\/span><\/a> and <\/span>TheGuarantors<\/span><\/a>, which both launched in 2014, and <\/span>Jetty<\/span><\/a>, which launched in 2015.)<\/span><\/p>\n

Rhino has also been courting landlords. In <\/span>a leaked webinar<\/span>\u00a0the company held on April 28, which has since been taken down, head of sales Eric Krauss encouraged landlords to embrace\u00a0its product to increase vacancies more quickly. Krauss also made clear that Rhino policies will be customized for each renter and that \u201criskier\u201d tenants will have higher monthly premiums.\u00a0<\/span><\/p>\n

Critics say calling these products \u201cinsurance\u201d is a deceptive marketing ploy that provides tenants with a false sense of security.<\/blockquote>\n

Critics say calling these products \u201cinsurance\u201d is a deceptive marketing ploy that provides tenants with a false sense of security. Some housing experts describe them as more akin to a surety bond, a type of three-way agreement in which a company promises one party that the other will meet its obligations. Housing authorities<\/span> have taken<\/span><\/a> different sides<\/span><\/a> on the question, and supporters note that Rhino and its peers are licensed insurance agencies.\u00a0<\/span><\/p>\n

\u201cIf tenants think of the product as insurance, as it\u2019s described in Rhino\u2019s marketing materials, and either don\u2019t realize they\u2019re purchasing a bond or don\u2019t know how a bond works, they may unwittingly sign up for a liability that far exceeds what they would ever willingly fork over to their landlord for a cash deposit,\u201d warned housing reporter Alex Williamson<\/span> in a Shelterforce<\/span><\/a> article last December.<\/span><\/p>\n

Williamson interviewed two tenants who confronted large unexpected charges from Rhino at the end of their leases, after their landlords claimed that they had to make repairs and handle damages due to their behavior.<\/span><\/p>\n

One tenant was Peter Steininger, a college student in Brooklyn whose landlord suggested that he get Rhino for a $45 monthly fee. (Rhino is available but not legally required in New York City.) When Steininger signed the contract, he didn\u2019t realize that he was agreeing to pay the company for claims up to $7,200, more than double his security deposit.<\/p>\n

When <\/span>Steininger<\/span> moved out, he learned that his landlord had filed $6,000 in claims. Steininger disputed the charges and provided evidence that the landlord had made false allegations. Rhino sent Steininger an automated message saying the company had ruled in the landlord\u2019s favor, and Steininger said he struggled to connect with anyone in customer service thereafter.<\/span><\/p>\n

Steininger told The Intercept that Rhino reached out to him shortly after the Shelterforce article was published and agreed to cancel the charges. \u201cI think I probably would\u2019ve been screwed if it wasn\u2019t for Alex and Shelterforce,\u201d he said.<\/p>\n

\u201cThese Rhino products are basically a scam, and that\u2019s why they\u2019re going around trying to get laws passed to specifically authorize these things.\u201d<\/blockquote>\n

Rhino maintains that the experiences outlined in the Shelterforce article are not representative, that they\u2019ve since stopped partnering with Steininger\u2019s landlord, and that they cut off landlords generally who make fraudulent claims. \u201cWe learned <\/span>a landlord abused the policy and claimed things that were not necessarily accurate,\u201d Jain said. \u201cWe are no longer working with them, and the renter was fully protected.”<\/span><\/p>\n

Housing advocates warn another major risk of Rhino is requiring that renters sign<\/span> arbitration agreements<\/span><\/a>, thereby giving up their right to take a landlord to court.<\/span><\/p>\n

\u201c<\/span>These Rhino products are basically a scam, and that\u2019s why they\u2019re going around trying to get laws passed to specifically authorize these things,\u201d said Eric Dunn,<\/span>\u00a0director of litigation at the National Housing Law Center.<\/span>\u00a0“Because they know if they just market them without some kind of legislation saying it\u2019s okay, then they could probably be sued under state consumer protection laws.\u201d\u00a0<\/span><\/p>\n

Rhino supporters say complaints that tenants will lose their right to take landlords to court ignore that most tenants never\u00a0do so even when they have good reason to. \u201cIf a landlord just keeps your security deposit, chances are you won\u2019t spend $5,000 in court to get it back\u00a0\u2014 and they know that,\u201d Jain said.<\/p>\n

Dunn thinks there is a version of Rhino that could be beneficial to landlords and tenants, but he\u2019s pessimistic that it will work out in practice because a less scrupulous product \u201ccould be more profitable.\u201d<\/p>\n

While Rhino and<\/u> its legislative partners are urging passage in more cities as soon as possible, citing the pandemic and the nationwide affordable housing crisis, there is not clear evidence of how the laws have worked in cities where it\u2019s already passed.<\/span><\/p>\n

In Cincinnati, the first city to authorize such a law,\u00a0the legislation took effect in April 2020.<\/p>\n

Zach Frye, a housing attorney at the Legal Aid Society of Greater Cincinnati, told The Intercept that so far they haven\u2019t seen much adoption of any of the security deposit alternatives by local landlords. Some of that, Frye suggested, could be driven by ambiguities in how the law was written. \u201cThe text of the law seems to have led to some confusion as to whether it\u2019s mandatory for the landlord to offer, [and] I think that a lot of landlords have decided not to deal with this and keep on doing business as usual,\u201d he said.<\/p>\n

While a<\/span> Curbed article from 2019<\/span><\/a> suggested that <\/span>the Legal Aid Society of Greater Cincinnati had backed the entire bill, Frye said his organization had supported<\/span>\u00a0alternatives like monthly installments,<\/span>\u00a0but not the provision authorizing Rhino<\/span>.<\/span><\/p>\n

\u201cOverall, we don\u2019t see many tenants as being aware of this law. And at least as to the \u2018insurance\u2019 option, that may be a good thing.\u201d<\/blockquote>\n

\u201cOverall, we don\u2019t see many tenants as being aware of this law,\u201d Frye said. \u201cAnd at least as to the \u2018insurance\u2019 option, that may be a good thing.\u201d<\/p>\n

\u201cIdeally, I\u2019d like to see exorbitant security deposits done away with completely, especially since they are so often used as a way to simply extract more money from renters,\u201d said Seth Weber, a volunteer with the Cincinnati Tenants’ Union, who also doesn\u2019t think most renters know the law exists yet. \u201cBut this is a half-measure in a city with a massive housing crisis, and to me that is unacceptable.\u201d<\/p>\n

In Atlanta, the legislation passed in October under the radar of local housing advocates, who said they were too consumed by the Covid-19 crisis to pay it much notice. Bambie Hayes-Brown, president of Georgia Advancing Communities Together and an appointee\u00a0to the City of Atlanta Housing Commission, told The Intercept that she plans to bring up the legislation at their next policy meeting \u201cto see if we can find out some information about how this is going.\u201d<\/p>\n

Back in Baltimore, Marceline White, executive director of the Maryland Consumer Rights Coalition,<\/span> co-authored a Baltimore Sun op-ed<\/span><\/a> in April outlining her concerns with the proposed legislation and its lack of protective guardrails. White told The Intercept that it\u2019s been \u201cradio silence\u201d from lawmakers since her op-ed came out.<\/span><\/p>\n

\u201cWhen you hear warnings and pleas from housing advocates and consumer protection experts that this might not be implemented in a way that it was intended, then perhaps you want to take a pause,\u201d she said. \u201cIt feels far too casual to say, \u2018Oh, we\u2019ll fix it later if we have to.\u2019\u201d<\/span><\/p>\n

The post Startup Alternative to Rental Security Deposits Gets Legal Backing in Baltimore<\/a> appeared first on The Intercept<\/a>.<\/p>\n\n

This post was originally published on The Intercept<\/a>. <\/p>","protected":false},"excerpt":{"rendered":"

It\u2019s the third city to pass legislation supporting Rhino, a real estate startup, but tenant advocates are urging a veto.<\/p>\n

The post Startup Alternative to Rental Security Deposits Gets Legal Backing in Baltimore<\/a> appeared first on The Intercept<\/a>.<\/p>\n","protected":false},"author":246,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[14],"tags":[],"_links":{"self":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/150779"}],"collection":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/users\/246"}],"replies":[{"embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/comments?post=150779"}],"version-history":[{"count":1,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/150779\/revisions"}],"predecessor-version":[{"id":150780,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/posts\/150779\/revisions\/150780"}],"wp:attachment":[{"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/media?parent=150779"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/categories?post=150779"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/radiofree.asia\/wp-json\/wp\/v2\/tags?post=150779"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}