Often, we are so focussed on helping more and more people onto the property ladder, that the challenges of those simply trying to find somewhere to live on a daily basis are overlooked. New research from renting firm Dlighted has revealed that the average London deposit on a tenancy agreement comes in at £3,014.
At the last census, Dlighted has found that there are 862,000 households in London who rely on the privately rented sector. If you add up the total amount these households might have paid for their deposits, this amounts to £2.6 billion. This is of course all sitting in deposit accounts, and essentially lost to London’s economy.
It is worth bearing in mind that the figure amounting to over £3k is just an average, so in certain boroughs, the deposit can be much higher. In Kensington and Chelsea, prospective tenants face deposits of £8,650; closely followed by Westminster at £8,031. Camden comes in at an average deposit of £5,894; Hammersmith and Fulham at £5,490 and Wandsworth at £3,569.
The cheapest 5 boroughs in London are Bexley at £1,655; Havering at £1,731; Croydon on £1,808; Sutton with £1,848 and Barking and Dagenham coming in at £1,898.
What impact do these figures have?
The managing director of Dlighted, Ajay Jagota, comments: “Recent research showed that a quarter of UK families have no savings, and another quarter have less than £100 in the bank. Asking them to find more than £3,000 just to become your customer is simply terrible business.
“It’s obvious: restricting potential renters to people who have thousands of pounds in the bank, or risking renters getting into huge amounts of debt just to rent with you costs you customers. Deposit free renting makes it easier to find and keep good tenants, whilst offering you […] more protection against damage and rent arrears.
It’s also bad for the wider economy to have £2.6 billion of Londoner’s money gathering dust, or gathering interest for someone else, when it could be used to help them get a foot on the property ladder, or to save for the future”.
Deposits and the private rental sector
The English Housing survey reveals that around 30% of homes in London are privately rented. This means that privately rented homes have now in fact overtaken homes occupied by the owner of the property, making the sector London’s most popular form of housing.
Outside of London, average deposit prices are considerably lower, but still on the rise. Landlords are likely to feel the benefit of increasing deposits, as this provides a higher cushion to cover any costs incurred by tenants. However, going forward, it makes sense to strike a better balance between this and unnecessary (or seemingly extortionate) fees for reliable tenants.
There are arguably better ways for landlords to protect against extra costs as a result of their tenants too. One way is to invest in some insurance; have a read here to speak to a member of the Just Landlords team, or to find out more about our products.