Whether you’re owed interest on security deposits depends entirely on where you rent. There is no federal rule on this. Roughly 14 states and the District of Columbia require landlords to pay it, a handful of cities add their own rules on top, and everywhere else your deposit sits without earning you anything. Where interest is required, rates are low: often well under 1%, sometimes as high as about 5%.
Does Your State or City Require It
Start here, because most tenants assume interest is owed when it isn’t. About a third of states, plus D.C., impose the obligation, and some major cities layer requirements on top even when their state doesn’t.
Even in jurisdictions that require interest, the rule may not reach your landlord. Some laws only apply to buildings above a certain size, such as those with 25 or more units. Others condition the obligation on how long the deposit has been held, how large it is, or whether it exceeds a set dollar amount or number of months’ rent. A deposit held under six months may generate no interest at all in some places.
To find out where you stand, check your state’s landlord-tenant statute and your city or county housing department. Your lease may reference the applicable rule, but a lease can’t strip away a statutory right to interest.
What Rate Applies
Where interest is required, the rate is set by law rather than negotiated. A few states fix a flat statutory rate (one state uses 1% per year regardless of market conditions). Others require a banking commissioner or similar official to publish a rate each year tied to the average return on savings accounts at insured banks; those rates track the broader rate environment and tend to be very low. Some cities with rent stabilization have a local commission that sets the rate annually. And a few jurisdictions simply require the landlord to pay out whatever the deposit actually earned in its account.
The practical range in recent years has run from well under 1% on floating rates to roughly 5% on fixed or locally set rates. On a $1,500 deposit at 1%, that’s $15 for a full year.
How to Calculate What You’re Owed
Nearly every jurisdiction uses simple interest, not compound. You earn interest only on the original deposit, not on previously accrued interest. The formula:
Interest = Deposit × Annual Rate × Time (in years)
A $2,000 deposit at 0.49% earns about $9.80 after one full year ($2,000 × 0.0049 × 1), and about $29.40 after three years. For partial years, prorate: six months at the same rate on the same deposit is about $4.90.
Watch the start date. In some jurisdictions the clock doesn’t begin on day one. Interest may only accrue after the deposit has been held six months or longer, which means a short tenancy can produce nothing even where interest is otherwise required. Your local statute will spell out when accrual begins.
When and How You Receive It
Three arrangements are common. In some places the landlord pays accrued interest each year, typically on the lease anniversary or by a fixed calendar date, either as a check or as a credit against the next month’s rent. In others, all accumulated interest is paid out when the deposit itself is returned after you move. A third approach treats the interest as a rolling rent credit, monthly or annually.
Where the law offers more than one option, the landlord often chooses the method but must notify you in writing of the choice. Some statutes also require documentation, such as a bank statement showing what the deposit earned.
One caveat: a small number of jurisdictions allow landlords to subtract an administrative fee, typically around 1% of the deposit per year, from the interest before paying it. When rates are already low, that fee can wipe out most of what you’d otherwise receive.
If Your Landlord Hasn’t Paid
Confirm first that your jurisdiction actually requires interest. Many tenants assume it’s owed when their state has no such rule. Pull the specific statute or ordinance and note the rate, the accrual start date, and any payment deadline.
Then put the request in writing. A letter or email that cites the specific law and lays out the math (deposit amount, rate, period held, total owed) creates a record and often resolves things on its own. Be specific.
If the landlord won’t pay, you have a few paths:
- Tenant rights groups and legal aid services in your area can advise you and sometimes mediate directly with the landlord.
- In cities with rent stabilization or deposit regulations, the housing department may investigate complaints.
- Small claims court handles these disputes without requiring a lawyer, and filing fees are usually modest.
The dollar amount of unpaid interest is often small, but the leverage can be larger than it looks. Several states impose statutory damages on landlords who fail to follow deposit rules, with penalties that can reach double or even triple the deposit. Those multipliers usually attach to broader violations like wrongful withholding rather than to interest alone, but in some jurisdictions a failure to pay interest or properly account for the deposit can trigger the same enhanced damages. A landlord looking at a potential penalty of twice the full deposit tends to resolve a $30 interest dispute quickly.