Lifetime Deposit Scheme Fundamentally Flawed
A leading provider of deposit alternatives has voiced concern at the Conservatives’ proposal to have a lifetime deposit scheme to make it easier for renters to move home.
Last week the Tories announced that there would be a digital certificate stating that a tenant’s deposit was still tied up with a previous tenancy, with the money transferring to the new landlord only once the previous one has returned it.
Prime Minister Boris Johnson said of the policy: “The costs of deposits make it harder to move. We are going to fix that … and introduce a lifetime deposit scheme so renters don’t have to save up for a new deposit while their money is tied up in an old one.”
However, deposit alternative service Flatfair – which has many estate agencies including the Hunters franchise network amongst it clientele – says this concept of ‘tenant passporting’ has been criticised in the past.
A statement from Flatfair says passporting “has often been criticised by industry bodies and landlords, who argue that it doesn’t work in practice.”
It goes on: “For example, landlords won’t let a new tenant move into their home if the deposit is being held up by a previous landlord who need to take deductions. Instead, the next government should take advantage of existing digital platforms that allow tenants to rent without a deposit while also keeping landlords protected.”
Flatfair members pay a transparent one-off membership fee that is equal to one week’s rent. Any deductions needed are handled at the end of a tenancy and tenants are ‘rewarded’ for good behaviour, with a reduction in the membership fee when they move to their next property.
“The idea of deposit passporting between tenancies has been around for a long time, and while it is great in principle, in practice it is fundamentally flawed” claims Franz Doerr, Flatfair’s chief executive.
“Tenants still need to secure a large lump sum when they start renting and therefore raising affordability issues for many. Landlords are also not properly protected by the system between tenancies, especially in cases where deductions are required or where there is a higher rent to be paid at the next property” he adds.
“We now have the technology to provide a better service, allowing tenants to rent without the need to pay a deposit upfront, while also offering better protection for landlords from any damages or rent arrears. The next government should double down on supporting existing solutions that are harnessing tech to transform renting and real estate more broadly in order to make the experience more transparent and seamless, as well as encouraging greater trust between the parties.”