Lower rate on security deposit discussed for Boulder renters

BOULDER — Sheila Horton owns a couple of eight-unit apartment buildings. When a University of Colorado student rented an apartment from her, the girl’s father read the lease and told Horton he had a proposition — take his $40,000 individual retirement account as a security deposit. That’s because, at a time when interest rates on even so-called ?high yield? money market accounts are hovering around 2 percent, Boulder landlords are required by a city ordinance to pay tenants 5.5 percent interest on security deposits.

Horton, executive director of the Boulder County Apartment Association, turned the man down, but laughs every time she relates the story. Horton thinks similar proposals have been made to other property owners in the 17 years the security deposit law has been on the books. Boulder is the only municipality in Colorado that requires security deposits.

The apartment association, a forum and advocacy group for property owners, is working with the city attorney’s office on bringing interest rates into line with reality, and should have recommendations for the city council within the next few months, Horton said. ?This is being discussed, and the parties involved are working on a means of coming up with a floating rate that will be acceptable,? she said.

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The requirement to pay interest on security deposits became a ballot initiative in 1985 due to a petition drive spearheaded by the now-defunct Boulder Tenants Union. The tenants union was formed as a renters’ rights group in 1969, and throughout the years organized rent strikes, advocated rent control and blacklisted unscrupulous landlords.

The security deposit initiative was approved by the voters, but did not specify the amount of interest, Horton said. The tenants union and apartment association discussed having a floating interest rate that would be re-established every January, Horton said, but some landlords balked at having to do the math every year.

A committee with representatives from both groups drafted a model lease and came up with 5.5 percent interest when, ?A bargain was cut for the convenience of not having to reset it every year,? Horton said. At the time it was a reasonable rate, but she continued, ?It’s been on the high side for every year but one.? Horton, who served on the committee, said she remembers the typical interest rate in 1985 as being about 10 or 11 percent.

Mark Fearer sees the situation differently. In 1985 Fearer was director of the Boulder Tenants Union and worked on the lease committee with Horton. ?Five-point-five was kind of low at the time,? said Fearer, who is still a renter in the city of Boulder.

According to Fearer, there have been attempts to change the interest rate from time to time, but none has been acceptable to the city council. He hopes the latest attempt to change it doesn’t work, either. ?Interest on deposit is so small relative to what tenants pay for housing it’s a barely noticeable drop in the bucket,? Fearer said. ?Housing prices in general have gone up tremendously far beyond reasonable and therefore deposits have gotten larger and larger, and landlords don’t mention they have the use of this money and tenants don’t.?Contact Caron Schwartz Ellis at (303) 440-4950 or e-mail csellis@bcbr.com