A recent study conducted by Zero Deposit, a company offering tenancy deposit alternatives, reveals a significant gap between tenant preferences and the options available in the rental market. Despite 59% of tenants expressing a preference for deposit alternative schemes, only 13% have been presented with such options.
The survey, encompassing 1,107 UK tenants who moved into rental properties in the last two years, indicates a notable lack of awareness about deposit alternatives. A striking 76% of tenants admitted being uninformed about these options. Among the participants, 49% identified themselves as professional tenants, and families constituted 33% of the respondents.
A vast majority, 85%, were required to pay a deposit to secure their rental accommodation, with 67% indicating their deposit was capped at five or six weeks’ rent. However, 18% couldn’t recall the exact amount paid. The study found that 43% paid their deposits directly to landlords, while 57% dealt with the landlord’s letting agent.
Limited Awareness and Offerings
Only 24% of tenants surveyed were aware of deposit alternative schemes, highlighting a significant information gap. Moreover, 87% reported that they were only offered the traditional rental deposit method when securing their last rental property.
Tenant Preferences and Usage of Savings
Given a choice, 59% of tenants would have chosen a deposit alternative scheme to lessen the initial financial burden of securing a rental property. When asked about the potential use of money saved from a traditional deposit, tenants cited paying other bills, covering rental costs, and starting savings as primary reasons.
Uncertainty Around Deposit Protection
The study also uncovered uncertainty among tenants regarding deposit protection. About 31% were unsure if their deposit was protected by a tenancy deposit scheme, while 58% confirmed protection through a custodial or deposit protection scheme, and 11% through an insurance-based scheme. Despite this uncertainty, 82% remained confident about receiving their full deposit back.
Sam Reynolds, CEO of Zero Deposit, expressed concern over the lack of tenant awareness and choice in the rental market:
“A rental deposit is one of the biggest obstacles many tenants face when it comes to securing somewhere to live. So it’s quite astonishing that as many as 76% are unaware about the options available to them when it comes to potentially bypassing this considerable upfront cost. When given the choice, tenants showed a clear preference for a deposit alternative that offered regulatory protections. This isn’t unusual as many are purchasing the product for the first time and naturally prefer the security provided by FCA oversight. Whether it’s a deposit alternative or a traditional deposit, it’s essential all parties understand the product clearly and are offered a fair and unobstructed choice of both options.”