It will come as no surprise that many tenants prefer the idea of deposit-free renting. After all, who wouldn’t prefer a lower up-front cost?
Many landlords find this option nerve-wracking though, and it can be difficult to reach a compromise. However, it seems there may now be a solution that provides the answer…
A recent YouGov survey revealed that 43% of tenants currently in rented accommodation would prefer to see classic tenancy deposits scrapped, and instead have the option of taking out deposit protection insurance.
Deposit protection insurance is a product which provides an alternative to the traditional security deposit, and acts as any standard insurance policy. A smaller one-off payment can be made, or a monthly or weekly fee can be paid into the policy, with the view that a claim may or may not be made, just like with your car or home insurance policy.
The option has proved positive with many opinion groups, with the Centre for Policy Studies calling for the Government to give their full support to the scheme.
By endorsing an insurance-based model as an alternative to a rental deposit, the government would rectify an unfair system which polling shows is unpopular with hard-pressed tenants.
Robert Colvile, director of the Centre for Policy Studies
However, the plans are not popular with everyone. Dan Wilson Craw, the Director of Generation Rent, an organisation dedicated to campaigning with private renters for professionally managed, secure and affordable privately rented homes, believes that there are bigger changes that need to be made to the way deposits are managed.
The tenancy deposit is a significant sum of money to find before you can move into a new home, and the system sorely needs to be made more affordable. Unfortunately, proposals to replace it with an insurance policy will make participating tenants worse off, because they get nothing back when they move out. Even if you borrowed the money for a deposit and paid it off over a few months, the interest involved would still be less than the premium you'd pay for deposit replacement insurance. Instead of introducing a new poverty premium, we should make the existing system better by finding ways to allow payment by instalments, investing deposits so that tenants get a decent return on their money, and passporting them between tenancies.
Dan Wilson Craw, director of Generation Rent
More and more landlords are looking for alternative options for tenancy deposits in the run up to the introduction of the Tenant Fee Ban next year, which will see deposits capped at six weeks’ worth of rent.
But what are your thoughts on the options available? Would you be prepared to offer an insurance scheme, or will you be sticking with the more traditional six weeks’ worth of rent upfront, or do you have an alternative solution?
Let us know in the comments below!
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