Brokers are sounding the alarm on one unintended potential consequence of the new rent law— and it most acutely affects those new to New York.
Since apartment owners are no longer allowed to charge more than one month’s rent as a security deposit, landlords may not be able to rent to the droves of international students in New York City who come to study at universities like NYU and Columbia.
Adam Frisch, managing principal at residential brokerage Lee & Associates Residential NYC, said that while tenant advocates may have intended to keep housing costs down for New Yorkers, the effects spell disaster for international students.
“For international students, it’s much worse. And the reason? It is now illegal in the state of New York to take more than one month security,” Frisch said. “We’re going to have a crisis with international students. Nobody will rent to them. They don’t have social security numbers.”
Columbia, according to its website, expects at least 14,000 international students this year. A significant portion of those will search for housing in apartments that are not managed by Columbia, even though the university is one of the largest landlords in the city, with more than 14 million square feet, mostly in Manhattan’s Morningside Heights neighborhood.
“International students have always had problems qualifying to rent apartments. We don’t see much impact so far and we have not received any inquiries from students,” a spokesperson from Columbia’s Off Campus Housing Association said in a statement.
The spokesperson also noted that nothing in the law prevents students from paying several month’s rent up front if they do not have a U.S. guarantor, and that many international students are already accustomed to paying up to a year of rent in advance.
Samantha Lu, the associate director of students at Columbia’s International Students and Scholars Office, said she hasn’t yet received an influx of calls from international students desperate for apartments from landlords willing to take a leap of faith.
That may be, in part, due to apps that are rushing to fill the gap and provide “credit enhancement” to potential tenants. The Guarantors, an app that insures renters who don’t meet leasing requirements, is a suggested resource on Columbia’s Off-Campus Housing Association website. The company provides risk-averse landlords with a guarantee on behalf of students— for a fee, according to its COO, Joe Ben-Zvi.
“The tenant pays us whatever the risk model determines,” Ben-Zvi said. For an international student at either NYU or Columbia, that can be “2-4 weeks’ worth of rent,” while for other students, credit enhancement can be as cheap as $500 dollars.
The Guarantors recently closed a $15 million dollar round of Series B funding. The startup has seen a big bump in referrals from clients since the rent law was changed, according to Ben-Zvi.
“This influx of renters being referred to my company means I may be taking on exponentially more risk than I would have done where the state actor didn’t step in.”
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