Don’t believe the naysayers. Tenants who ‘zero deposit’ are better off in the long run

With landlords being squeezed by onerous regulation coupled with interest rate rises and inflation booming the chance to get 60% more deposit cover than cash schemes seems to be an obvious choice.

Indeed, our own research shows just 14% of tenancies end with outstanding costs that exceed the five weeks’ rent provided for by cash deposits.

Yet misconceptions remain around deposit alternatives suggesting tenants who choose them are more likely to fall into arrears or mistreat the property due to a lack of ‘skin in the game’.

HINDER PROGRESS

But under scrutiny this just doesn’t stack up and only serves to hinder progress in the industry.

Tenants using a deposit alternative remain fully liable for end of tenancy costs, just like cash deposits.

The difference is that they pay for what they owe at the end of tenancy rather than paying an arbitrary (often excessive) amount of money at the start of tenancy into a non-interest-bearing account.

The reliability of tenants using our product shows in data which confirms 56% of tenancies end without outstanding charges and less than 5% end in a dispute.

Analysis reveals that the average amount left owing by tenants is £262 – that’s 81% less than a cash deposit currently averaging around £1,378.

Are hefty deposits even needed across the board?”

So, are hefty deposits even needed across the board?

We charge one week’s rent (as a non-refundable fee) and offer landlords eight weeks of protection free of charge.

We have created a solution well suited to the realities of the sector while the inclusion of deposit alternatives in the Government’s How to Rent Guide demonstrates they’re an increasingly relevant part of the private rented sector.

DATA FEEDBACK

Data is one side of the coin and we equally value feedback from our landlord customers.

Stephen Giacchino, a landlord of six properties in the Midlands told us: “I’ve never had an issue with the tenants – they’ve all paid their rent on time. There’s no typical tenant who has chosen to use it, they’re a mix of ages and are professionals including healthcare workers or engineers.”

Julia Matthews, a landlord with properties in Swindon and Andover says an increasing number of her 30 tenants chose our scheme and that although she’s never had to make a claim, having eight weeks of protection available was ‘great to have for peace of mind’.

BETTER DEAL

And Andy Taiwo, who has properties in Bradford and Manchester, adds: “I think this is a better deal for tenants and landlords. Tenants get to hold on to their cash and use it to help with moving costs, whilst landlords get the extra cover.”

Zoopla just announced the affordability of renting is at its worst for a decade. Our survey showed 30% of current renters were borrowing money to fund a cash deposit – another reason why a tenant’s capability to produce a lump sum is unreliable as a financial indicator.

Tenant reliability is best assessed with quality referencing – something we require tenants to pass in order to be eligible to use the product.

Ben Grech is Chief Executive of Reposit