A property industry trade organisation has outlined how lifetime deposits might work, ahead of the publication of the Renters’ Reform Bill next year.
Propertymark believes that these should be known as a tenancy deposit passport rather than a lifetime tenancy deposit – otherwise it implies that the tenant will spend their whole life renting.
It has come up with suggestions in The Future of Renting position paper which also includes proposals on energy efficiency targets and digitalising possession claims.
It says tenant deposit passporting should include a range of options such as a tenant guarantee bridging loan or insurance policy via a tenancy deposit scheme, deposit builder ISA, and encouraging employers to offer a deposit loan scheme.
With a tenant guarantee arrangement, once a tenant has paid a full deposit and they move on and rent another property, the deposit protection scheme retains the money, any deductions are made, and the remaining money is held by the scheme for the next tenancy.
The tenant buys an insurance policy or gets a bridging loan from the scheme which is used to claim against any deductions.
Alternatively, a government-protected savings pot could be made available to renters using a deposit builder ISA.
Applicants would be able to demonstrate that the funds were in the account at the start of the tenancy and the account could be associated with a tenancy deposit scheme to resolve disputes. Tenants would also be able to save in this account, eventually using the funds for a deposit to buy their own home.
According to Propertymark, the government should be doing more to encourage employers to offer staff an interest-free loan to pay for their deposit.
It says that with a deposit loan scheme, companies and organisations would be provided with guidance on how to package financial wellbeing benefits and information to employees in a more helpful way. Repayments could be made in instalments via deductions from a tenant’s monthly salary.
It also believes there could be wider use of deposit bond schemes – a written agreement between a local authority, the landlord or letting agent and the incoming tenant.
“The update from the government in respect of ‘lifetime deposits’ is hotly awaited by landlords, tenants and agents alike,” says CEO Eddie Hooker (pictured) of Hamilton Fraser.
“In reality, the solution may well be an amalgamation of all the ideas discussed in the Propertymark report. But probably more important is the requirement to improve the current deposit regime, making deposit protection more transparent, easier to administer and quicker to release deposits.”