MW These companies are replacing mom and dad as a guarantor for renters. It will soon be a $1 billion-a-year business.

By Charles Passy

There's a burgeoning business in companies that will pay your rent if you can't, but it can cost the equivalent of a month's rent - or more

As a busy entrepreneur who owns a marketing company, Joseph Franklyn McElroy says he can easily earn well into the six figures. But he also says he has faced some credit issues in the past, so he doesn't meet the financial requirements that many landlords establish for prospective renters.

All this has come to a head in McElroy's efforts over the years to secure an apartment in New York City - most recently, a three-bedroom unit in a trendy Brooklyn neighborhood. But McElroy has used a workaround on multiple occasions: He's paid a third-party company to serve as his guarantor. Meaning if, for some reason, he fails to pay the monthly rent - $6,250 in the case of his latest apartment - the guarantor will be held responsible.

The price for the service isn't cheap: McElroy says it cost one month's rent - yes, $6,250 - for the guarantee this most recent time. But he is grateful nonetheless.

"It's been a lifesaver," said McElroy, who will soon be moving into the three-bedroom with his wife and two children.

Is this the future of the rental industry, or at least a big part of it? With countless would-be tenants in McElroy's position of looking less than financially secure to would-be landlords, companies with apt-sounding names, such as Insurent and theGuarantors, have stepped into the void to serve as, well, the guarantors.

They can indeed charge the equivalent of a month's rent for their service, though the fee can sometimes be as low as 75% of that monthly figure and as high as 150%, according to companies in the space. And to be clear, if a renter defaults on a lease, the guarantor may cover the payments, but the renter is still on the hook. In this instance, the money is no longer owed to the landlord but to the guarantor.

In any case, the guarantor industry appears to be thriving - not just in New York City, but also in other U.S. markets as well as those across the world.

A study from Verified Market Research, a consulting firm, estimates the global rent-guarantor market will generate $775 million in revenue this year, which is up nearly 10% over 2024. And by 2032, it could nearly double and become a $1.53 billion industry, according to the study.

The guarantor service is becoming "a regular feature in rental agreements, setting up the sector for long-term worldwide growth," said the Verified Market Research study.

Of course, renters don't have to rely on a third-party service but can turn to family - i.e. the Bank of Mom and Dad - or friends to serve as a guarantor. But it's not always possible.

"We're grateful for our parents, but they're not in that position" to help, said Altin Sencalar, a New York City resident who relied on a third-party guarantor to secure an apartment.

Generally speaking, landlords require that prospective tenants have an annual income equal to 40 times the monthly rent - that works out to $100,000 for a $2,500 rental - and a credit score of 700 or higher. There's still some leeway: Landlords can and often do consider extenuating circumstances, according to housing experts and professionals, but there's no promise of that.

The problem is that so many people can't meet these requirements, owing to a number of factors.

For starters, rents are fairly high from a historical perspective. The typical monthly U.S. rent has gone from around $1,200 in 2015 to about $2,000 today, according to data from Zillow. The market has stabilized more recently, with a year-over-year increase now at 3% when it was climbing as high as more than 15% in 2022, according to Zillow.

But that still leaves many Americans in a tough spot, according to Zillow data, with the median household now spending 29.4% of its income on rent. That's close to the 30% threshold that is considered the safe maximum allocation.

Still, many Americans can pay the rent, but when they submit their applications to lease an apartment or home, they come up short. Third-party guarantors cite numerous examples of those who may not look good on paper, but who are really qualified candidates.

They can be gig workers whose income can vary from month to month and year to year. Or those with inherited wealth who have sizable assets, but don't have a weekly paycheck to show. Or even seniors with a solid retirement portfolio, but again, no paycheck.

Add up all the examples and you have "a tremendous market need" for third-party guarantors, said Ben Berk, a vice president of residential solutions at MRI Software, the company behind Insurent, a prominent U.S. guarantor.

Yet another example: International students who come to the U.S. with no established credit history here and no other easy way to show they can afford the rent, even if they have the financial means.

In fact, Julien Bonneville, founder of theGuarantors, another major company, was in that very position when he came to New York from France more than a decade ago. And that's what led him to create his business.

"I was rejected by most of the landlords I visited," he said of his initial hunt for an apartment.

Both Insurent and theGuarantors said their businesses have been growing steadily, though they didn't provide specific revenue figures. The companies also make the point that the guarantor industry has become invaluable to landlords in ways that go beyond just safeguarding rent payments.

That is, it can bring landlords more potential tenants.

That's a point not disputed by property owners. "It expands our renter pool," said Jarrod Whitaker, a senior vice president with RXR Realty, a company that owns and operates 9,600 rental units across the country.

Not that some housing experts don't see a downside to this burgeoning guarantor industry. The most obvious one: It's levying a surcharge on people who may already be under enough financial pressure to afford the rent.

Richard Kent Green, a professor of planning, policy and development at the USC Marshall School of Business, said the advent of the guarantor industry prompts him to recall the famous James Baldwin observation that it's expensive to be poor. Green added that the idea of paying the equivalent of a month's rent just to get a guarantor and secure a lease "seems excessive to me."

Green doesn't deny that landlords have a right to be concerned about a tenant's ability to pay. He said the real solution is to beef up government programs that would make housing less expensive in the first place, not to have would-be renters paying for guarantors.

Fixing the affordability issue "should be a federal responsibility," Green said.

-Charles Passy

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May 16, 2025 15:17 ET (19:17 GMT)

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