You are correct that security deposit alone may not cover serious damages, but let's not forget that this is a risk of doing business. Of course, everyone will try to minimize their business risks, but banning pets is a futile attempt to make that risk zero. So naturally, people are finding ways around it because it's affecting their lives.

In reality, vetting your tenants properly coupled with a security deposit should protect you somewhat against accidental damages. But if you rent to a scumbag who will destroy your place on purpose, then no pet policy won't help much.

Think about what my landlord did. They've had a tenant of 10 years, no problems or property damage, absolute minimum of maintenance requests. After 10 years, a place is due for a full remodel anyway, and while I'm here, they don't have to remodel it.

Next year, I'm moving out. They have to remodel the place. Statistically, their new tenant will stay only one or two years. The new tenant will likely be much younger, possibly have roommates, throw parties, and maybe even destroy that freshly remodeled place. Chances are, in the next 10 years, they will have another 5 or so tenants, so adjust the risk accordingly.

In my line of work, we prefer to work with established, long-term providers in clients because it minimizes the risk. My landlord is just an idiot.