Are landlords losing out on £61 million in rent because of deposits?
Landlords could be missing out on £61 million of rent every month because families in temporary and emergency accommodation may not be able to afford deposits to rent privately.
Official figures show the number of families living in temporary accommodation has risen by 500 per cent since 2009, says Ajay Jagota, head of the #ditchthedeposit campaign and founder of deposit-free renting initiative Dlighted.
This equates to 78,930 families – including 120,510 children – currently living in emergency housing, he says.
Jagota says around £845 million of taxpayers’ money has been spent on temporary accommodation for homeless families since 2010 with additional emergency housing currently costing the government £160 million every year.
He says that if these families were living in permanent private rented sector properties and paying the average UK rent, this would mean £60,933,960 of rent would be paid into the sector each month, totalling £731m a year, which, in turn, would be spent in the wider economy. He said: “It’s heart-breaking that so many people have no permanent roof over their heads, children in particular.
“What is frankly scandalous is that it doesn’t have to be this way. This appalling situation is inevitable but in many case entirely avoidable given landlords and letting agents' perverse insistence on only renting properties to people who can hand over an average of more than £1,000 in deposits.
“No-one is saying that deposit costs are the only cause of homelessness but if you’re a landlord or letting agent and you can’t rent out a property, ask yourself why that is case when there are enough people to fill a town the size of South Shields, Burnley or Carlisle who are literally desperate to rent a permanent home” he added.
“At a time when the government’s own impact assessment is predicating the ban on Letting Agents Fees will cost the industry hundreds of millions of pounds and even force letting agencies out of business, the industry has to ask itself whether or not it can afford to write off that sort of income, especially when deposit replacement insurance offers far superior protection against unpaid rent, property damage and legal fees.”
Indeed, it’s often fear of arrears that stops private landlords taking on vulnerable tenants, and problems with payments under the government’s Universal Credit scheme hasn’t helped boost their confidence.
The good news is that the government’s guide for landlords on universal credit and rented housing has been recently updated. From April 2018, families on universal credit entering temporary accommodation (not just emergency temporary accommodation) will now be making claims for Housing Benefit instead – meaning rent will be paid by the local authority rather than the tenant.
Richard Truman, Head of Operations at Simple Landlords Insurance, said: “We know that working with local authorities and with tenants on benefits can be a successful strategy for some landlords, especially those looking to diversify their portfolios, or to go hands-off by letting out properties on a longer term basis to a council.
“Jagota is right that the key is make sure you have a safety net in place, and that’s where insurance products like legal expenses come in. Always check what you’re covered for, and adjust your insurance to meet the needs of your particular property, tenant type, area, and personal circumstances.”