Recent data on spiralling rents makes for grim reading amidst an already severe cost of living crisis.
Figures from HomeLet show that compared to last year, average rent in London is up 11.8 percent – almost double the current rate of inflation.
Conventional wisdom holds that with five weeks’ rent held as a deposit – a huge sum in cities like London and Manchester – renters would be incentivised towards good behaviour when there is so much money on the table.
However, flatfair’s data shows there are fewer disputes between landlords and tenants when deposits are avoided altogether, and tenants simply pay for any charges when they move out, or if necessary independent government-backed adjudicators make a judgement against all the evidence that has been shared.
This is the model that flatfair uses, and the good behaviour of our tenants is evident from the data we’ve collected: 62 percent of plans have closed without charges.
High deposits are traditionally levied against tenants to protect property owners against damage – but our data puts lie to that idea. In reality, there is little evidence to suggest taking large sums promotes any behavioural changes. On the contrary, trusted tenants make better tenants.
Not only that but given that tenants typically don’t get deposits back before they move into a new place, large deposits disincentivise moving home, stymieing the rental market. According to a report by the Centre for Policy Studies (CPS), forcing tenants to come up with enough cash for deposits makes it difficult for many individuals to relocate between residences for precisely this reason. Compared to homeowners, renters are far more likely to have insufficient savings to stump up the cash for two deposits simultaneously.
Unsurprisingly, according to YouGov polling, 43 percent of renters said they would prefer to see deposits replaced with an alternative system.
However, this statistic suggests that traditional deposits do indeed work for many people. Rethinking the way, we approach deposits isn’t about mandating one process over another but providing savvy renters with a full breadth of options in order to enable them to make the choice that makes the most sense in their circumstances.
Deposit alternatives are therefore a win-win for tenant and landlord.
Tenants aren’t faced with the financial burden of having to find a sizeable deposit in a high-inflation environment, and landlords can rest easy in the knowledge that deposit-free systems don’t make tenants any more likely to damage the property – indeed, they may in fact incentivise better behaviour, particularly where alternatives are marketed as an amenity alongside perks traditionally offered in BTR, such as co-working spaces or communal living areas.
It’s high time we opened the market and started to provide all tenants access to a deposit alternative, allowing them to make the choice on which option is the right one for them.
Read The Neg’s recent feature on the alternative deposit sector,
Gary Wright is COO and co-CEO of flatfair.