Financial Innovation Comes to Residential Leases

Security Deposit Alternatives, Guarantor-as-a-Service Bring Credit Enhancement to Rental Markets

Accelerating rent growth and evolving renter profiles have created the need for creative financial products that act as forms of credit enhancement for tenants. Security Deposit Alternatives and Guarantor-as-a-Service (GaaS) products have emerged as solutions to address the challenges faced by both renters and landlords in the residential rental market, while companies like Jetty, Rhino, The Guarantors, and more have built meaningful businesses on the backs of these models.

Security Deposit Alternatives and GaaS products serve differing needs, but fundamentally they expand the rental base for property owners. However, they raise important questions for both property owners and renters about incentive alignment and moral hazard. 

Today’s letter will look more closely at these financial products and explore:

• The structure and differences between Security Deposit Alternatives and GaaS products;

• Benefits and risks to landlords of offering these solutions;

• Target use cases and value proposition to tenants;

• The future of tenant screening, credit underwriting, and how financial products may evolve.