New NCLC Report Reveals Hidden Risks and Costs of Predatory PropTech Products
BOSTON – The rise of property technology, or “PropTech,” is exacerbating the country’s rental housing affordability crisis. A new report from the National Consumer Law Center (NCLC) shines a light on one predatory PropTech product, security deposit “alternatives.” Millions of tenants who use them end up paying more and may be left with fewer legal protections.
Security deposit alternatives are third-party financial products that tenants are encouraged or even required to purchase so that they can move in without paying traditional security deposits. Promoted as a lifeline for renters struggling with the high upfront costs of a new apartment, security deposit alternative products have nonrefundable fees, higher overall costs, misleading marketing, and fail to protect tenants, according to the report, “Tenant Insecurity: How Security Deposit ‘Alternatives’ Raise Tenants’ Costs and Erode Their Protections.”
“Security deposit alternative products attempt to evade state laws designed to protect tenants,” said April Kuehnhoff, senior attorney at the National Consumer Law Center and co-author of the report. “They are marketed as a helpful tool for renters struggling to raise the sizable fees required to move into a new apartment. But in reality, they’re just another way to extract profits from tenants with low incomes.”
“Security deposit alternative products make it more expensive to be a renter,” said Steve Sharpe, senior attorney at the National Consumer Law Center. “People pay and pay, but at the end of the lease none of the fees are refunded unlike a traditional security deposit. On top of that, they can face debt collection to reimburse the PropTech company or even have money removed from their bank account based on the landlord’s damage claims.”
Households of color are more likely to be renters and more likely to be disproportionately harmed by these predatory practices targeting tenants. According to 2026 data from Harvard University’s Joint Center for Housing Studies, discriminatory education, employment, and housing practices have resulted in more than half of Black (57 percent) and Hispanic (54 percent) renters being cost burdened, i.e. paying more than 30% of their income for rent and utilities. In contrast, 44 to 45% of Asian and white renters are similarly cost burdened. These inequities are further compounded by discriminatory tenant screening practices that use error-ridden data in tenant-screening reports to disproportionately deny housing to Black and Latino renters.
“State and local governments should take steps now to address unaffordable upfront rental housing costs, including junk fees, and to rein in these harmful products,” said Ariel Nelson, senior attorney at NCLC. “Local governments can increase access to traditional security deposits, increase enforcement of existing laws, and prohibit abusive practices by landlords and security deposit alternative companies.”
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