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Down with Deposits: The Case for Rental Insurance

Down with Deposits: The Case for Rental Insurance
Photo by Dan Kitwood/Getty Images

Polling by YouGov has shown that 43% of renters would support a system of deposit replacement insurance with a small cost rather than the current system of tenants paying large upfront deposits.

This report finds the average renter loses over £300 per tenancy due to lost interest and inflation because of forced participation in the existing deposit protection schemes.

Forcing tenants to pay large up-front deposits mean many people struggle to move between properties. They also lose out on accruing interest on their money which instead is retained by their landlord or letting agency, and often face a real struggle to receive their money back.

In this new report, Brian Sturgess proposes that the Government should promote a deposit replacement insurance system as an alternative, which would allow renters to insure against potential damage or missed rent payments without having to find a large up-front deposit, estimated to average around £1,041.

Such insurance schemes, which could easily be developed within the existing insurance market, would enable renters to retain more of their own money when moving into a property, enjoy the interest accruing during their tenancy, and avoid borrowing from friends, family, or pay-day lenders to gather enough funds for a deposit. The latter would be especially important for the 31% of private renters who have less than £100 in the bank.

An insurance-based model would also allow renters to build up a reputation as a good tenant through a ratings system similar to no-claims bonuses for motor insurance, while landlords still received protection against property damage and missed rental payments.

Crucially, an insurance-based model would significantly improve the lives of ‘Generation Rent,’ at no cost to the treasury.

The YouGov polling showed that tenants would prefer, by 43% to 41%, an insurance scheme to the current deposit system.

The polling contained in the report was commissioned by Zero Deposit, which offers a deposit replacement scheme, but the report and its recommendations were produced independently by Brian Sturgess and the CPS, with no external funding.

Robert Colvile, Director of the Centre for Policy Studies, said:
“This Government have a real opportunity to rectify the damage done by Labour to the rental market.

“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.”

Brian Sturgess, author of ‘Down with Deposits’, said:
“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 at all.”

Update, Aug 7: This report has been amended to correct and clarify certain figures. 

Brian Sturgess - Sunday 5th August 2018