Don’t qualify for an NYC apartment? There’s a new way to get a guarantor, but it costs.

Want that New York City apartment but can’t quite meet the landlord’s income requirement? You still may be able to get it — if you’re willing to pay an extra fee.

New York City’s uber-competitive real estate market is spurring the growth of a new financial option aimed at helping tenants secure apartments if they buy insurance that guarantees monthly rent payments to the landlord. Companies providing the service said owners of hundreds of thousands of New York City apartments now accept them as guarantors, up from just a few thousand 16 years ago.

Real estate experts said the insurance is allowing tenants to access apartments they might otherwise be locked out of, while tacking another upfront cost on top of the broker fee, security deposit and likely sky-high rent.

Typically, prospective tenants would have to turn to a wealthier relative to cosign their lease if they don’t earn 40 times the monthly rent, a common income requirement in New York City meant to convince landlords that a renter can afford their apartment. The rule means that applicants for a $3,000-a-month apartment must be able to demonstrate they earn at least $120,000 a year to land the unit.

But the burgeoning corporate guarantor industry means tenants who don’t meet the 40 times the monthly rent threshold may still be able to satisfy the landlord through a third-party company.

“It certainly helps landlords because if somebody skips out on paying rent, the insurance policy kicks in,” said real estate attorney Steven Sladkus. “And it helps tenants who might be marginally qualified financially, where a landlord might say, ’Hey, I'll let you rent here, but I want a guarantor.'"

But having a third-party guarantor doesn’t come cheap, Sladkus said. Two New York City-based companies, TheGuarantors and Insurent, each charge tenants anywhere from 50% of the monthly rent to more than one month’s rent for their coverage after using insurance underwriting techniques to determine an applicant’s rate.

“The only thing that someone might say, between having a real person guarantor versus going to a third-party company is, you’ve got to pay a premium for this and that's just an added expense on top of the rent,” Sladkus said.

Prospective tenants who can’t meet the income threshold could tap a guarantor, often a family member, who would be on the hook for the rent if they miss payments. But landlords usually ask the guarantor to make 80 times the monthly rent — $240,000 a year for that same $3,000 a month apartment. And many renters don’t have a rich uncle or distant relative to vouch for them.

“We want to open the pool of tenant prospects, but mitigate any potential risk because of what our screening protocols are,” said Jarrod Whitaker, a senior vice president at RXR Realty, which follows the 40-times-the-rent rule and has an agreement with TheGuarantors for tenants purchasing “rent protection” insurance.

The third-party guarantor industry is growing, especially after a 2019 state law limited how much landlords can legally require for a security deposit — a measure intended to curb upfront costs.

Tenants who stop paying rent face more than just an eviction notice. The companies will pay the landlord and then go after the renter for defaulting by either negotiating a payment plan, selling the debt to a collection agency or taking the tenant to court. The companies are regulated by the Department of Financial Services, which once fined TheGuarantors for providing weaker coverage than they indicated in state filings.

Jesse Schmidt, TheGuarantors’ senior vice president for sales, said his company now has agreements with the owners and managers of about 700,000 New York City apartments, most of them large corporations, with thousands of units each. The company is accepted by the owners of about 2.3 million additional apartments nationwide, he said.

Insurent claims to be the first to offer the lease protection bond and says on its website that it has agreements with owners of close to 800,000 units across the country. Insurent did not respond to requests for comment.

New York City’s extremely tight rental market means landlords can be picky when it comes to selecting a tenant — leaving people with well-paying jobs out of luck as a large number of apartment-hunters compete for limited housing stock.

“So this offers another choice for [landlords] to help protect themselves and hopefully fill apartments,” Schmidt said.

Schmidt said the insurance also benefits tenants who have decent jobs and incomes but don’t quite meet the landlords’ demands.

“Students, freelancers, people in between jobs, folks who are coming from overseas and don't have U.S. credit history, these are all good examples of people who really may not have had a good option before to qualify for the home that they wanted to live in,” Schmidt said.

The guarantor companies are gaining traction at the same time as tenants face a number of other rising fees.

A February report by listings site StreetEasy found the average New York City renter already pays more than $10,000 in upfront costs — including a broker fee, security deposit and first month’s rent — before moving into an apartment.

Some tenants also complain that they are forced to pay for the plan year after year when they renew their leases.

Josh Sultan, a former Queens resident who has worked at a tattoo arts supplier in Raleigh, North Carolina, said his current landlord required him to purchase the coverage through a guarantor company before moving into his $1,200-a-month apartment, even though he earned more than $100,000 a year and had good credit.

Sultan said he was surprised when he was forced to pay the fee again when he renewed the lease on his North Carolina apartment.

“When I went to re-sign my lease, they said you have to pay another $1,600 for the bond,” Sultan said “I was like, ‘What is this?’”

Sultan said he had paid his rent on time each month and continued earning above the minimum income threshold, so he was confused about having to pay the fee again. He said he never got a clear answer from the landlord, a large, Tennessee-based corporation.

“The landlords get all these protections and the tenants have to pay for it,” he said.

Other housing experts said they were wary of the growing industry.

Real estate broker Anna Klenkar said she has worked with renters who used the service, and managed buildings where tenants used third-party guarantors to insure their rent. She said the products can be useful for tenants who would otherwise miss out on an apartment, but said she is concerned more landlords could make them a requirement.

“I’m sure there will be landlords who say, ‘Just to be on the safe side, get it,’” Klenkar said. “It can be positive, it can be good, but not when we get to a situation where landlords consolidate, own tens of thousands of units, and set any terms they want.”

Sam Stein, a housing policy analyst at the Community Service Society, said regulators should monitor whether property owners begin making all tenants in their buildings buy coverage from a corporate guarantor.

“Don’t penalize tenants for using it, but don’t penalize tenants for not using it,” Stein said. “As soon as it becomes something that’s a demand, it’s a problem.”