Member Article

Renters priced out of house and home by soaring deposits turning to payday lenders

• 49% borrow to pay for deposits, which are up by half since 2007 • Region’s renters face £850 bill just to open the door • “You can’t get a mortgage if you’ve got too much debt, so why are we demanding renters get into debt!”

A generation of renters are being priced out of house and home by deposits which have risen by 50% since the financial crisis – with almost half having to borrow money just to move into a new property.

Figures from the government-backed Deposit Protections Service show that the deposits tenants traditionally pay landlords have jumped from an average of £600 to £900 since 2007, even though wages have risen by only 13% in the same period.

This rise has been attributed to landlords increasingly seeking deposits the equivalent of six weeks rent rather than the conventional four.

According to the figures from Housing NOW, the monthly analysis of the North East property market by local sales and lettings firm KIS, regional renters could be left facing a £850 bill just to get the keys to a new property.

Figures from deposit protection service MyDeposits has also shown that 49% of renters have to borrow money from their parents, friends or a payday lender to get the money together to pay for a deposit.

North East property business KIS was the first letting agent to abolish deposits. Under the firm’s one of a kind Let by Cover scheme, landlords sign up instead to an insurance policy which gives them guaranteed rent, legal assistance – including court and bailiffs fees, and round-the-clock repairs, while making it easier to find and keep good tenants.

KIS manage properties for 700 landlords from branches in Sunderland, North Shields, South Shields and Welwyn Garden City. Named Letting Agent of the Year at the 2013 Landlord and Letting Awards, the firm recently expanded into residential sales.

Founder and Managing Director Ajay Jagota, “I completely get why landlords think that four weeks rent isn’t enough of a deposit to cover the cost of serious damage to their property – it invariably isn’t - but that’s a reason to ditch them, not double them.

“Hearing that half of renters have to borrow to pay deposits is alarming. It does nothing to nurture long-term tenancies to push people into debt, especially when they borrow from a payday lender. You can’t get a mortgage if you’ve got too much debt, so why are we demanding renters get into debt!

“It’s not like tenants are wholly safe either. The loophole that allows a landlord with an insurance deposit to goes out of business, leave the scheme or even get expelled from it without paying their tenants back a penny is still open.

“Landlords are better off ditching deposits altogether, not just financially, but practically – I’m sure any landlord who has been through the agonising process of arbitration just to get access to compensation they are legally entitled too when bad tenants have left them out of pocket will tell you.

“We’ve seen three times as much interest in properties we manage since we launched Let by Cover as it makes it so much easier to find good tenants and so much easier to keep them.”

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