A major study has revealed that half of renters want deposits ditched and replaced with low-cost insurance policies – as a both a leading think tank and the consumer group Which? call for the government to reform rental deposits.
A YouGov survey has revealed that 43% of renters would prefer to rent deposit free with deposit protection insurance to forking out more than £1000 for a traditional deposit.
71% of readers of a national newspaper also backed deposit-free renting in an online poll.
The polls follow a major report by the Centre for Policy Studies backed deposit free renting.
The study found the average renter loses over £300 per tenancy due to lost interest and inflation, and suggests the government introduce a deposit replacement insurance system, where landlords, letting agents or even tenants take out low-cost insurances policies which protect property investors against legal fees, potential property damage and missed rent payments.
The study report that such a scheme would empower renters would retain more of their own money when moving house, earn interest accrued during the tenancy, and avoid borrowing from friends, family, or payday lenders – as well as build up a reputation as a good tenant through a ratings system similar to no-claims bonuses for motor insurance.
Centre for Policy Studies Director Robert Colville called on the government to get behind zero deposit renting in order to “rectify an unfair system which polling shows is unpopular with hard-pressed tenants.”
Report author Professor Brian Sturgess stated:
“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”.
Consumer group Which? has also come out strongly for deposit reform, describing the current deposit protection system as “broken”.
Research by Which? also revealed that two in five renters used a credit card, overdraft, or borrowed money from family or friends to cover the cost of their deposit.
Alex Neill, Which? managing director of home products and services, stated: “The number of people going into debt to cover the cost of a new deposit is concerning, particularly when you consider that many are forced to wait a significant time to get their previous one back.
“The deposit system is crying out for reform so that it is fit for purpose for the record numbers of people who are living in rented accommodation.”
Ajay Jagota from the #ditchthedeposit campaign and zero deposit rent firm Dlighted welcomed the reports.
#ditchthedeposit campaigns for reform of the rental market, and calls for the government to support deposit free renting, in doing so allowing the £4.2bn of renters money currently held in deposits to be released into the economy or utilised in Help to Buy ISAs.
Dlighted is a zero deposit rent solution which comprehensively protects landlords and letting agents against rent arrears, property damage and legal costs while allowing them to find and keep good tenants.
“The message to landlord and lettings agents couldn’t be clearer. Your customers want deposit free renting.
“With both a major think tank and Which? coming out in favour of 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.
“These reports have inevitably led to a lot of fake news about deposit-free renting means renters paying out month after month and the deposit free renting market being somehow dangerously unregulated.
“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.
“Renters themselves don’t pay a penny unless they personally take out a policy by agreement of their landlord.
“The vested interests in the deposit protection scheme establishment have predictably trooped out to claim that only they can protect landlords and tenants – at a time when at least one of them has publically admitted that it is struggling to deliver its work. It doesn’t add up.
“This issue is only going to become more important as Britain moves further towards a European-style housing model where more and more people have no intention of ever becoming homeowners, with one recent survey finding 17 million renters not intending to ever purchase properties of their own”.