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Save renters £500 by ditching deposits, property expert proposes

A property expert has warned political efforts to lower the cost renting for the North East’s half a million private tenants will fail without a major house building programme – and argues that the simplest way to give tenants a better deal is to ditch deposits.

Ajay Jagota of North East sales and lettings business KIS believes that renters will save at least £500 if landlords and letting agents “do away” with the “old-fashioned and out-dated” practice of asking tenants to pay up-front deposits to move into new homes.

The House of Commons this week voted against Labour proposals to ban letting agents from charging fees to tenants. The government earlier outlined its own proposals to fine letting agents for failing to publish full details of fees charged to tenants.

KIS were the first agents in the UK to abolish deposits, replacing them with a one-of-a-kind landlord insurance policy.

A recent study commissioned by the Residential Landlords Association branded deposit schemes “poor value for money”.

KIS manage properties for 700 landlords from branches in Sunderland, South Shields, North Shields and Welwyn Garden City and were named Letting Agent of the Year at the national Landlord and Lettings awards 2013.

Ajay said: “We all want to see secure long-term tenancies and an end to renters being ripped off, my fear is that no new law can guarantee either of those things and could even make things worse - even Shelter have warned that rents may rise if letting agent fees are banned.

“If fees are banned, landlords and agents could have to look elsewhere to make ends meet. And even the most upstanding and ethical could end up passing the cost on to tenants one way or another.

“The central solution to almost all the ills of the private rented sector is a major programme of house building and as well-intentioned as these proposals are they will in all likelihood have limited success without them. It’s simple supply and demand – you can only keep rents down if you reduce the pressure on the limited stock of available housing.

“In the short term the simplest way to give renters a better deal is to abolish deposits. Landlords get nothing out of them and with a typical deposit usually a month’s rent tenants it would save tenants an average of £560 in the North East.

“Deposits are old-fashioned and out-dated and it’s time to do away with them, not least as our insurance policy has rendered them obsolete. Realistically £500 isn’t going to stretch too far in the event of serious damage or rent arrears, and even that depends on actually getting your hands on it.

“At the same time you’re limiting your potential renters to people with that kind of money to spare. Ditching deposits is a foolproof way of finding and keeping good tenants.”

This was posted in Bdaily's Members' News section by Ajay Jagota .