Many tenants are unaware that Madison City Ordinance 32.07 requires landlords to pay 5 percent interest per year on any security deposit paid by a tenant.
According to Ald. Austin King, District 8, even when tenants are aware of this ordinance, they are rarely paid the interest owed to them. Tanya Stanfield, campus coordinator at the Tenant Resource Center, 1202 Williamson St., agreed.
\A lot of landlords just conveniently forget about it,"" she said.
A new proposal in the Landlord and Tenant Subcommittee could significantly lower this interest rate, indexing it to the annual interest rate calculated by the Wisconsin Department of Financial Institutions.
Five percent was originally chosen because landlords could receive a better interest rate from lending institutions at the time, said Ald. Mike Verveer, District 4.
""The landlords want to lower it now,"" Verveer said, ""because for a good amount of time landlords [and anyone else] have not been able to get an interest rate higher than 2 or 3 percent at the most.""
King, who is opposed to the new proposal, said he did not think there was one tenant in the entire City of Madison that this move would be popular with.
""This is increasing landlord profit,"" King said. ""One of the ironies about this debate is that landlords say, well, landlords never give out the 5 percent interest anyway, so if we decrease it to one percent or whatever, it will decrease the number of landlords that actually rip off their tenants. It's just a very circular argument.""
Verveer, who cited his status as a tenant, said the new proposal definitely benefits landlords.
""What I hope to do,"" Verveer said, ""is that if we do pass this, I want tenants to get something out of this through a compromise.""
Verveer said he desired two concessions: one, that a tenant who pays his rent late still be paid interest; and two, that a tenant who renews his lease be paid interest annually.
Madison landlord Paul Marunich said he supports the lowering of the interest rate because tenants should not profit from their security deposits.
""I'm holding their money and I'm not making any money on it. If they put this in the bank they wouldn't make 5 percent,"" he said.
