A lettings agent has called for deposits to be abolished, saying it would release money into the economy and help stamp out rogue landlords and agents who help themselves to tenants’ money.
Ajay Jagota, of lettings agents KIS, which provides an insurance policy rather than taking deposits, says others should follow suit.
He says this would free up cash locked in deposit schemes, adding: “Study after study concludes that they are the biggest barrier to entering and moving house in the private rented sector, with our research showing the average renter needs to stump up more than £1,000 to get the keys to a new home before they’ve even paid the first month’s rent.
“But time and time again policy-makers ignore this in favour of the same old cul-de-sacs and clichés like banning of letting agent fees or rent controls.
“Not only would abolishing deposits mean the £3.2bn being release into the wider economy, £2bn of which is literally just gathering dust and interest right now, it would make it easier for renters to move house, easier for them to keep a house and easier for them to save for a property of their own.
“A survey recently showed that 78% of renters want greater protections from their landlords – this is the simplest and most effective way of giving them that piece of mind.”
Rather than the tenant paying a deposit, landlords using the KIS scheme can pay a fee to get cover of up to £7,500 for either six or 12 months. The policy is underwritten by insurer Dlighted.
For example, six months of cover worth up to £2,500 costs £99 for six months or £129 for 12 months.
If they wanted £5,000 to £7,500 of cover they would pay £249 for six months and £279 for 12 months.
This policy can be used to cover rental arrears and can also be used for claims of up to six weeks’ worth of rent for malicious damage.
There is also recourse within the policy to take legal action against tenants if necessary.
It comes after Southampton Labour MP Alan Whitehead earlier this month raised a question on government efforts to crack down on rogue lettings agents.
Speaking during Prime Minister’s Questions, when Chancellor George Osborne was standing in, Whitehead said: “A Southampton letting agency has recently been banned from trading for three years for not giving tenants their deposits back and using them for other purposes.
“The situation, however, as far as letting agents are concerned, is that they are almost completely unregulated and it’s pot luck whether Southampton residents actually get a fair deal from their letting agents or not.
“Is the Chancellor intending to do anything about this?”
Osborne simply replied that the Government looking at consumer protection for tenants.