Deposit replacement schemes have been labelled as a “wild west” by campaign group Generation Rent.
Speaking yesterday on Radio 4’s You and Yours programme, Hannah Slater, policy and public affairs manager for Generation Rent, expressed concerns about the emergence of deposit alternatives.
She said: “Deposit-free schemes are a real wild west with a lack of regulatory oversight and information on costs and ability.
“There is a real spectrum of products. They are really cashflow solutions for tenants that reduce upfront costs but you can still end up paying in the long run so it doesn’t help with affordability.”
In contrast, Slater argued, tenants at least have a chance of getting a traditional deposit back – rather than paying a lower, but non-refundable fee for a deposit replacement product.
She added: “There is obviously a place in the market but it is important that deposit protection schemes are improved so they can compete with these ultimately poorer value alternatives.”
Slater was speaking during a segment on the rise of deposit scheme alternatives that also featured flatfair, described by Slater as “on the better end” of the market.
You and Yours presenter Melanie Abbott asked flatfair co-founder Franz Doerr about its regulatory status.
Doerr said he would support more regulation but added that while his firm was not regulated, it is part of the Financial Conduct Authority’s innovation hub where it can get first-hand advice from the City regulator.
He said: “Regulations need time to catch up. At the moment tenants have to trust landlords and agents that they have done their due diligence.
“We think there should be regulations introduced through the Housing Act such as ensuring a scheme uses independent mediation and is insured.”
Doerr was also challenged on what would happen if flatfair collapsed and responded that there was insurance that would mean no tenant or landlord would lose money.