It is estimated that £4.5bn of cash is currently tied up in rental deposits, providing landlords with a degree of security and peace of mind, amid the coronavirus crisis.
Various reports suggest that a growing number of tenants are now struggling to pay rent due to the impact of the Covid-19 outbreak, after having their wages cut.
Despite the government’s Coronavirus Jobs Retention Scheme, many employers are asking staff to reduce their hours, take a pay cut or to be furloughed, and this is having an adverse impact on those required to pay rent.
Polling conducted by Opinium, on behalf of the Guardian, showed many renters are currently either already in or on the brink of a financial crisis, with one in six forced to seek extra financial help to stay afloat.
The survey found that six in 10 renters had suffered financially as a result of the UK-wide shutdown.
Buy-to-let landlords generally recognise the importance of taking a deposit from a tenant and placing it in a government-backed tenancy deposit scheme as protection to ensure that any potential damage or unpaid rent at the end of the tenancy is covered.
But Canopy, a FinTech start-up, believes that many landlords and tenants would be better off if more renters were to replace their cash deposits with its deposit replacement insurance policy, which provides added protection for life events, such as critical illness or job loss.
As opposed to a renter being required to pay a full five weeks rental as a cash deposit, Canopy’s premium costs 10% of the amount covered (i.e 10% of eight weeks rent) for a 12-month tenancy agreement, 15% for a 24-month tenancy and 20% for a 36-month tenancy.
Canopy’s cover also offers an extra three weeks of protection to landlords i.e. eight weeks cover as opposed to the standard five weeks with a cash deposit.
Tahir Farooqui, founder and CEO of Canopy, commented: “Due to the profound impact COVID-19 is having on the lives and livelihood of renters, we feel that now is a crucial time for all in the market to shift from a mindset of ‘selling’ to one of ‘supporting’ lettings agents, landlords and tenants to the best of our abilities.”
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Polling on behalf of the Guardian, well we can ignore that then, will be far from the truth.
4.5bn pounds sterling. Oh wow, who gets the interest from that money then? Certainly not the owner of the money, I.e. The tenant or following default, the landlord.
Perhaps the money should be returned with interest? That way the tenant would be more likely to want it back by being a good tenant.
I am not in favour of private companies getting their hands on this money without being govt backed, as when they go bankrupt as many do, all the money mysteriously disappears. Everyone seems to loose except the CEO and his cohorts who then seem to own a new luxury yacht, paid for by the wife, of course.
Has anyone carried out a similar exercise on home owners who may be suffering the same financial problems as the renters?
These schemes just cost tenants more, with a traditional provided the tenants has liked after the property they'll get their deposit back in full.
I can see this being popular with rogue tenants. Good luck with the insurance getting any money back from the rogue tenant.
Having some 'skin' in the game gives an added incentive to look after the property.
CV19 has little to do with encouraging this change when canopys publicly declared raison d'etre is "eliminate ALL forms of Rental deposits by 2025 including deposit insurance".
I would have thought that one lesson from the current crisis is the need for much better proof of affordability by prospective tenants and one way to demonstrate that is to have saved a substantial deposit.
Deposits can help both landlords and tenants as they could be drawn on in current circumstances to protect Landlords' cash flow whilst protecting tenants' homes.
Snake oil " no deposit " schemes will only make money for their salesmen, protect no one and cast doubt on the tenants' financial acumen, capability to manage their finances properly and commitment to look after our property.
My mantra continues to be " no deposit, no tenancy".
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