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 ith many of the 75 million Echo Boomers heading off to
college this decade, college enrollment has been climbing since
2001. Despite a seeming wealth of potential renters, owners and
managers of off-campus housing must still compete for residents who
have more and better housing options than ever. This presents a
challenge to offer more of what college students want, more
affordably.
This generation also has higher housing
expectations. Feature- and amenity-rich housing is far more
prevalent, and students often have their pick of very attractive
options. This makes for challenging business environment for student
housing providers. How do you attract student residents with a
competitively priced apartment and still offer the little luxuries
they expect?
Owners and managers of more than one million
apartments nationwide now offer a security deposit alternative—most
often in the form of a surety bond—which allows residents to move in
at a significantly reduced cost while affording the property manager
protection against financial loss due to damages or skipped
rent.
How do security deposit alternatives work? At lease
signing, the renter is offered the choice of purchasing the surety
bond, or paying a traditional security deposit. Typically, the bond
costs the renter less than one-fifth of the traditional deposit and
affords the management company similar coverage. For example, for
$500 worth of coverage, the student pays an $87.50 security deposit
alternative premium. To select the surety bond, the resident signs a
short form acknowledging the purchase of the bond, and makes the
payment for the premium directly to the surety. The surety, in turn,
assures the property owner or management firm that the renter will
fulfill the lease obligations at the end of the lease
term.
The one-time, non-refundable premium remains in effect
throughout the term of residence. Additionally, the bond continues
to provide coverage at no additional cost if the renter moves to
another apartment within the portfolio, even after
graduation.
If the resident meets his or her rental
obligations and returns the apartment in good condition, There’s no
further obligation at move-out; but if the apartment suffers
physical or monetary damages, the owner or property manager files a
claim to the provider for direct payment. The provider then collects
reimbursement for the claim from the student, who, under the terms
of the bond, remains fully liable for lease obligations.
Additionally, the provider assumes all collection and recovery
activity, saving owners and managers valuable human
resources.
Worth noting: since the security deposit
alternative premium is non-refundable, it precludes the hassle of
returning security deposit checks at the end of the semester, or if
a student leaves mid semester. Also, since management can offer the
bonds “per bed,” there’s no need to divvy up a cash deposit among
roommates at the end of the lease or if there’s a roommate change.
Parkway Crossing is a three-year-old student housing
property managed by Phoenix, Arizona-based Alliance Residential
Company. Since the fall of 2006, the 1,236- bed community serving
Utah Valley State College has offered a security deposit alternative
to its student residents. According to Regional Manager Stacy John,
students can pay a non-refundable $87.50 bond premium for $500 worth
of coverage in place of the traditional security deposit.
“We
also charge our residents a nonrefundable $100 administrative fee at
move-in to cover cleaning expenses and other administrative costs.
The lower cost surety bond option makes the move-in expenses far
more palatable to the renter. As a result, we are marketing the fact
that we can offer students the option of paying reduced upfront
costs at lease signing,” said John.
“Moving time for college
students can be an expensive proposition beyond the basic moving
costs of utilities set up and furnishing a new place. College
students also drop a fair amount of money at the beginning of each
semester on books, lab fees and other class supplies. By helping
them hold onto a little more of their cash at these points during
the year, security deposit alternatives can make a real difference
for those on a student budget,” she added.
According to
Cameron Omoto, program manager for Alliance Residential Company,
which has already deployed security deposit alternatives throughout
approximately 55% of its portfolio, which is comprised of more than
100 multifamily communities in 10 states, “Security deposit
alternatives are a no-lose proposition, especially in softer markets
where move-in specials prevail. Not only are we better protected
against unrecoverable losses, but we can offer a more attractive
leasing option to our residents.”
There’s no question that
college students are in tune with the latest and greatest,
preferring new construction with hot amenities and known to move
onto something better quickly. By helping students and their parents
keep more money in their pockets for the school year, and at the
same time, giving property managers a powerful marketing and risk
management tool in competitive times, security deposit alternatives
help everyone pass “Macroeconomics 101” with flying colors. 
Stuart Litwin is CEO
of SureDeposit. With more than one million units in nearly 3,300
communities under agreement, SureDeposit is the nation’s leading
provider of alternatives to traditional security deposits. For more
information, call 1-800-531-7873, or visit online at
www.suredeposit.com.
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