The Cincinnati City Council passed a law Wednesday that gives renters a choice on how to pay their security deposit and includes an innovative option to pay security deposit insurance.

The new city law, approved in a 6-1 vote, is seen as possible model legislation by advocates calling for reforms to make housing more affordable.

It would make it easier for people to rent affordable housing by lowering the cost of putting together a security deposit, which can be the sum of two months rent.

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Such a large security deposit, on top of paying for a month's rent, can put housing out of reach for people who otherwise might be able to pay their first month's rent.

Landlords under the new law would be required to provide their tenants with several alternative choices in lieu of the traditional security deposit.

If potential renters have the means to do so, they can pay a traditional security deposit, or they can elect to pay the security deposit out in no less than six equal monthly payments.

But the most innovative option is the ability for tenants to opt for security deposit insurance. Instead of paying a security deposit up front, tenants instead pay an insurance company a low-cost, monthly non-refundable premium.

The idea for the legislation – spearheaded by Cincinnati City Council member P.G. Sittenfeld (D) – was born from talks that the local lawmaker had with Ankur Jain, co-founder and chairman of Rhino, a startup that specializes in security deposit insurance.

Sittenfeld, 35, said that he was introduced to Jain in October through a mutual connection that was a former official in the Obama administration.

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“It opened my eyes up to what he and others in this space are doing,” Sittenfeld said. Through his talks with Jain, Sittenfeld was able to begin to craft legislation that would “disrupt the traditional security deposit, removing a key up-front barrier to housing for thousands and thousands of tenants in Cincinnati.”

Sittenfeld estimated that, if successful, the new law could inject up to $70 million into Cincinnati’s economy.

Jain, who co-founded Rhino in 2017, said that the startup was created with the goal of solving the “housing affordability issue.”

“One of the things that we realized was that as expensive as monthly rent has become, one of the issues that people had kind of been ignoring was how much money it cost just to move into an apartment,” he explained.

“When we dug into the data, we found that there was over $45 billion of cash locked up in security deposits, which is an enormous amount of money taken out of the economy and out of people’s savings.”

Jain and his company found great success in New York City, where the start-up is based. Partnering with some of the city’s largest landlords, Rhino created a catalog of 110,000 apartments where tenants could opt into using Rhino’s services. Jain told the New York Times in October that Rhino had saved New Yorkers $60 million in security deposits.

For a $3,000/month apartment in New York, tenants pay Rhino about $13 monthly.

However, Rhino isn’t the only company that Cincinnati renters will be able to use. Companies such as Jetty, Obligo, SureDeposit and TheGuarantors also provide tenants and landlords with services similar to Rhino’s.

Other state lawmakers around the country learned of the Sittenfeld’s legislation in November, when Sittenfeld and Jain gave a presentation at The NewDEAL conference in Washington, D.C.

Many who heard the presentation believe that Cincinnati’s legislation could be the steppingstone for similar legislation in state governments around the country.

Democrats in particular have expressed interest in the midwestern city’s new legislation.

Virginia Delegate Mark Keam (D) said that last week he introduced H.B. 1333 in Virginia’s House General Laws Committee.

The bill requires “a landlord permit a tenant to provide damage insurance coverage meeting certain criteria in lieu of the payment of a security deposit had already introduced” and limit the “total amount of any combination of security deposit and rental insurance coverage required by the landlord to twice the amount of the periodic rent payment.”

Keam is confident that the legislation will be able to steadily make its way through the state’s House and be voted on this year, though he did say that a Virginia Senate version of the bill has yet to be introduced.

New Hampshire state Sen. Jon Morgan (D) said that a bill like the one that was passed in Cincinnati could be great for the Granite State, where the median rent for a two-bedroom is $1,347 monthly.

Similarly, North Carolina state Rep. Ashton Clemmons (D) said that such a bill would be welcomed in Greensboro ­– the city she represents – which has the highest eviction rate in the state and one of the highest in the country.

National data backs up the lawmakers’ claims.

The National Low-Income Housing Coalition (NHLIC) 2018 report showed that the U.S. had a deficit of seven million affordable rental homes for renters who are extremely low-income, meaning that their income either falls below the national poverty line or below 30 percent for their local median income.

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At a national level, this translates into only 37 available and affordable for every 100 extremely low-income renter households.

Cincinnati Council member Jeff Pastor (R), the only city lawmaker to vote against the bill, called the legislation a “radical departure from an established practice that exists to protect both renters and landlords.”

“Inserting the city government into an established market condition is almost certainly going to lead to negative unintended consequences for renters and especially already vulnerable populations,” Pastor added.

The council member also said that he voiced his concerns with the bill when it was first introduced, but that they were never discussed while the bill was in committee.

Amy Murray, the other Republican on Cincinnati’s City Council, voted in favor of the bill.