There are of course various costs associated with renting a property; one of the largest expenditures (just like a house purchase) is the initial deposit that is placed as security against property condition and the rent.
The Centre for Policy Studies (CPS) think tank has recently published a new study that found just under half of tenants would support a move to axe the system of private rental deposits; in fact, 43% were in favour of the implementation of a replacement insurance-based substitute. Due to what the CPS referred to as “forced participation”, on average a tenant loses over £300 in large up-front deposits which can make the process of moving properties difficult particularly when the full amount of any deposit is required against a new house.
A big issue concerning getting onto the rental market in the first place relates to the struggle to fund a large upfront deposit; something that many prospective tenants cannot provide without help from friends and family. For some, the inability to lay out an initial up-front sum prevents them from being able to get onto the rental market.
There is a growing movement to urge the government to replace up-front deposits which would alleviate this issue, enabling tenants and renters to see a more consistent return of their money as well as benefit from the interest. Professor Brian Sturgess (CPS report author) states “The proposals in this report offer a solution to the inherent unfairness of renters losing out on interest they would have accrued on such a deposit, and often having to struggle to get their money back”
Lettings Branch Manager Laura Fiddes-Baron comments “Landlords will benefit as their properties should let quicker if tenants don’t have to stump up a large deposit which should mean they can move in quicker avoiding any void period in properties to let.”
Another benefit of this shift in deposit processes for everyone concerned is that there would also be the same level of protection offered by a standard deposit. Indeed, some of these insurance schemes have a partnership with the Tennant Deposit Scheme (TDS), meaning that arbitration still has the same level of fairness. Laura adds “‘zero deposits’, as an example, is partnered with the TDS and they have managed to agree that the arbitration process time scales are halved if a tenant has taken out the insurance scheme through them.”
It goes without saying that the requirement for a deposit will always exist in order to provide security for both the homeowner and, providing that letting agents follow the correct registration processes, the tenant as well, however a revamp of the process in order to provide easier access to more prospective tenants is in our view a positive move for the wider housing sector.