2023-12-28 13:14:44
Homeownership is deeply ingrained as part of the American Dream.
My parents bought a home in Makawao, upcountry Maui when I was very young. Our small house was in a working-class neighborhood, and we were proud to be homeowners. According to Zillow, our house that originally cost $369,000 in 2003 is currently worth over $750,000, more than doubling in 20 years.
Today, purchasing the same 1,000-square-foot home on a 6,000 square-foot lot would require a downpayment of over $26,000 and a monthly mortgage over $5,800. With the dream of home ownership seeming out of reach for most people in my generation, a revised dream has emerged: affordable rent.
Even “affordable rent” feels distant as prices for a decent place to live in many places in the United States have skyrocketed. In New York City, the average cost of a 1-bedroom rental is $4,333, in San Francisco, it’s $4,407, and even in historically more affordable cities like Milwaukee, rents are approaching $1,400.
I want to live in a place that I love and feel deeply connected to — a place I call home. But budgeting and finding a place that I can afford is difficult.
Homes located on Maunalani Heights. Security deposits can be difficult to finance. (Cory Lum/Civil Beat/2022)
Even harder is coming up with thousands of dollars for a security deposit before moving in. Security deposits protect landlords’ property from people not paying rent or damaging the property. However, these deposits put additional strain on the overburdened renter.
Many people struggle to come up with large security deposits and options are limited. Some people can get a loan from family or a bank. Others save up the money over a long period of time.
Security deposits are necessary to protect an owner’s property, but tie up money unnecessarily. The renter has to come up with thousands of dollars, and that money sits in the landlord’s bank account until the end of the lease when, if there is no outstanding balance, the money is returned.
The money that sits in the landlords bank account might be put to better use by the renter to pay for other essentials. The security deposit system is outdated and needs to be reformed.
Consider Security Deposit Insurance
“Security deposit insurance” solves the problem of renters not having access to thousands of dollars upfront as well as landlords needing a deposit to feel secure.
Security deposit insurance works similarly to other insurance policies. Renters pay a monthly fee, and in the event of property damage or unpaid rent, the insurance company compensates the landlord.
Companies offering this type of policy have emerged nationwide, especially in high-cost-of-living areas such as San Francisco and New York City. In these areas, rents are high and security deposits can be as high as one- to two-months worth of rent.
With security deposit insurance, monthly premiums can be as low as $15 to $20. That is a cost most renters can afford. Presently, deposit insurance policies are unavailable in Hawaii, despite the high demand and limited housing inventory.
To support affordability and reduce the mass exodus of my generation and our talent out of the Islands, Hawaii needs to take action immediately. Hawaii might be the next place where security deposit insurance plays a crucial role in addressing housing equity issues, ensuring the people from here continue to live here.
Many people struggle to come up with large security deposits and options are limited.
The way to guarantee that all renters in Hawaii have access to security deposit insurance is through passing a law that states landlords must accept this form of deposit. Cities such as Atlanta and Cincinnati have passed bills that require landlords to accept deposit insurance if the potential tenant chooses to use it. This legal framework might be replicated in Hawaii to remove one of the major barriers to housing.
Although I now live and work on the mainland, my goal is to bring my experience back to Hawaii to effectively tackle the affordable housing crisis that plagues our community.
In partnership with Housing Hawaii’s FutureI authored a policy brief regarding security deposit insurance that further outlines the need and ways to implement the legislation. To read it, click here.
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