MORE THAN TWO MILLION HOUSEHOLDS SUPPORT THE ELIMINATION OF MANDATORY DEPOSITS FOR RENTERS Think tank calls for alternative to help Generation Rent A new report published by the Centre for Policy Studies finds the average renter loses over £300 per tenancy due to lost interest and inflation because of participation in the existing deposit protection schemes.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.
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 his new report, ‘Down With Deposits: The Case for Rental Insurance’, 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, appeared on BBC London News yesterday to discuss our proposals. ‘Down with Deposits: The Case for Rental Insurance’ is available to download from the Centre for Policy Studies website.