A new study shows that 43 per cent of tenants want the system of private rental deposits to be dropped and replaced with insurance-based alternatives.
The study comes from the Centre for Policy Studies, a think tank, which claims the average renter loses over £300 per tenancy due to lost interest and inflation because of what it calls “forced participation” in deposit protection schemes.
“Forcing tenants to pay large up-front deposits mean many people struggle to move between properties. They also lose out on accruing interest on their money which instead is retained by their landlord or letting agency, and often face a real struggle to receive their money back” says the CPS.
Instead the think tank calls on the government to adopt insurance-based alternatives “which could easily be developed within the existing insurance market, would enable renters to retain more of their own money when moving into a property, enjoy the interest accruing during their tenancy, and avoid borrowing from friends, family, or pay-day lenders to gather enough funds for a deposit.”
CPS report author Professor Brian Sturgess says: "Currently many people are simply unable to enter the rental market due to the need for a large upfront deposit to be provided before they move in. The proposals in this report offer a solution to the inherent unfairness of renters losing out on the interest they would have accrued on such a deposit, and often having to struggle to get their money back”.
Similar support for alternatives to deposits have been advocated by consumer organisation Which?
The CPS report has been backed by Ajay Jagota from the #ditchthedeposit campaign, who is also head of zero deposit rent firm Dlighted.
Jagota says the introduction of deposit free renting would allow the £4.2 billion of renters money currently held in deposits to be released into the economy or utilised in Help to Buy ISAs.
“The message to landlord and lettings agents couldn’t be clearer. Your customers want deposit free renting. It’s clear that the tide has irreversibly turning against old-fashioned deposits which cost renters a fortune and cost landlords and letting agents tenants without actually protecting them against anything” he says.
“In the case of Dlighted deposit free renting means deposit free renting. With Dlighted renters pay nothing as our low cost insurance policies are purchased by landlords or letting agents because deposit free renting makes is so much faster, easier and cheaper to find and keep good tenants.”
On the subject of regulation for such schemes, Jagota adds: “We are calling for all Deposit replacement operators to be directly authorised by the Financial Services Authority, not as introducers or intermediaries (as many currently are), so collectively as providers, we can be subject to much more meaningful and rigorous regulation than others in the private rented sector"