Property People Strategy & Governance Finance

Access to Rent: Deposit loan scheme

A case for enabling greater access to the private rental sector through the provision of a government-backed

affordable loan scheme.

Technical report

April 2018

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Contents1. | Introduction

3

1. | Detailed proposal4

2. | Cost calculations7

3. | ‘Housing and Life Experiences’ study17

4. | Additional research findings21

5. | Conclusions31

Appendix A |References32

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1. | Introduction

With high house prices and a reducing social housing sector, the private rental sector is often the only housing option for low-income households. However, many families on low incomes are unable to access the private rental sector as they are unable to afford the initial deposit needed to be granted a tenancy. This, combined with the lack of affordable credit available to those on low incomes, can result in tenants starting their tenancy in high levels of debt, or can leave them in unsuitable, overcrowded accommodation, or homeless.

To help tackle this problem, this report proposes that the government should introduce a nationwide affordable deposit loan scheme, ‘Access to Rent’, for those on low incomes. Through this scheme the government would provide dedicated financing to existing bodies, such as building societies, social lettings agencies, credit unions, local authorities, or other social lenders, who would provide loans at a low-interest rate, based on government borrowing rates.

This report acts as a technical report to the ‘Access to Rent’ summary report published by the Joseph Rowntree Foundation https://www.jrf.org.uk/report/housing-advice-service-widening-access-housing-advice. In this report we present a detailed proposal for a Access to Rent, our funding assumptions and cost analysis and outline the findings from our research which led to its development. It also includes brief case studies covering existing good practice in this area.

Th Access to Rent proposal was shortlisted as one of four potential initiatives that could help alleviate poverty issues identified through the ‘Housing and Life Experiences’ study undertaken by Centre for Housing Policy (Croucher et al, 2017a, 2017b, 2018). For further details of the study and our methodology in selecting ideas, please see our covering report (https://www.jrf.org.uk/report/housing-and-life-experiences-policy-development).

We also outline the main findings from our research during the development of the proposal. These include:

General outputs from the ‘Housing and Life Experiences’ study (Croucher et al (2017a,

2017b and 2018)

Interviews with participants in the ‘Housing and Life Experiences’ study on the specific

proposals

A review of relevant literature based on Google and Google Scholar searches

Interviews with landlords and their representatives, local authorities, credit unions and

other stakeholders

Feedback on the developing proposals from a virtual reading group.

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1. | Detailed proposal

1.1. | OverviewIt is proposed that the government introduces an ‘Access to Rent’ scheme. This would support those unable to afford a rental deposit in the private rented sector by providing individuals and families on low incomes with access to fair and affordable credit.

Through this scheme the government would provide dedicated financing to existing bodies, such as building societies, social lettings agencies, credit unions, local authorities, or other social lenders, who would provide the loans at a 5% interest rate, based on government borrowing rates. Local authorities would not need to register with the Financial Conduct Authority to supply the loan, and credit unions and building societies will already be registered. However, other providers will need to register to offer the service. Provision of low-cost, risk-free, dedicated funding for the loans themselves is likely to offset any difficulties of becoming registered with the Financial Conduct Authority.

Key features of ‘Access to Rent’ include:

Loans would be backed by the government and would be charged at a low-interest rate.

This would be enabled by pegging the loans to the cost of government borrowing.

There would be a centralised website so that applicants could be directed to their nearest

provider. If the Housing Advice Service proposal was adopted, this could be the medium

for promoting the service.

Providers would then be responsible for completing assessments, verifying applications

and administering the loans. The loan would be offered only on the basis that the landlord

would not accept a guarantor option first, as this option would be cheaper for the tenant.

To qualify for the scheme individuals/families would need to be living below JRF’s

minimum income standard (Padley and Hirsch, 2017) and show willingness and capacity

to repay the loan.

Loans would generally reflect the value of the deposit, and tenants would pay 5% interest

on the loan. We have established through our financial analysis that this would cover the

cost of government borrowing and would be affordable to tenants (taking into account that

lower quartile rents in London and Oxford were not considered affordable to those on low

incomes before adding in additional costs).

Loans would be available to be used for both furnished and unfurnished accommodation,

as well as shared accommodation.

Once approved, the applicant and provider would agree on the repayment period, which

would be between 12 to 18 months. We have established through our analysis that any

shorter than this would be likely to be untenable for those using the loan.

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The loan would be paid to the landlord, who would be obligated to hold the rental deposit

in a Tenancy Deposit Protection Scheme/Safe Rent Scotland. The tenant would pay back

the loan to the lender over the period agreed. If there were not any problems (that is, the

loan was repaid and there were no deductions to the deposit), the tenant would get their

deposit back at the end of the tenancy. The tenant would however remain liable for any

end-of-tenancy deductions. This would assure the landlord and loan provider that the

tenant would remain mindful of keeping the property clean and paying their rent on time.

If an applicant were to move out before the end of the tenancy agreement, tenants would

have three months in which to repay the balance with a minimum payment agreed with

the agency. Applicants would also be able to apply for a loan on a new rental property, if

they were up to date with their payments for the loan for the previous property. This would

help reduce the up-front costs of moving between tenancies at a time when transferable

deposits are unavailable.

As the scheme is based on the provision of loans by the government, similar to student

loans, it counts as an asset not a liability, so the cost will not count against the national

debt (National Audit Office, 2016).

Considering the growth of the private rented sector in recent years, there is much to do to make this sector workable for the increasing number of low-income households who are reliant on it for a home. This scheme, therefore, is designed to supplement existing and proposed provisions designed to address the frontloaded costs of rental deposits, for example, a government-backed guarantors scheme, employee benefit loan schemes and zero-deposit insurance products. The proposal to introduce a government-backed loan scheme would fill a gap in the market by ensuring that those on low incomes unable to access existing deposit products can also receive much-needed support for raising a deposit.

We propose using local authorities and existing agencies to run the scheme in order to minimise set-up costs; most local authorities already offer some form of support with tenancy deposits. However, if the UK government or devolved national governments were to fund the development of the infrastructure for this scheme, it would be likely to be more comprehensive and effective.

Our analysis of the six locations reviewed demonstrated that lower income families could not afford the average lower quartile private rents in London or Oxford. This proposal does not negate the desperate need for funding for truly affordable rental products.

The government has brought forward a draft Tenants’ Fees Bill which will, among other things, cap holding deposits at no more than one week’s rent and security deposits at no more than six weeks’ rent (DCLG, 2017). It is however worth noting that these changes will not apply in Scotland and Northern Ireland. In Scotland private rental deposits are already capped at two months’ rent, and further security for private tenants is being introduced.

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Nothing is currently in place to protect Northern Ireland tenants from excessive deposits. We therefore recommend that a similar cap is put in place in Northern Ireland.

Note:

A national guarantees scheme underwritten by the government is a strong option to support tenants with up-front costs. This also overcomes the complication of providers of the proposed Access to Rent scheme having to register with the Financial Conduct Authority, which can be a difficult process.

Feedback from local authorities and landlords, as well as participants in the ‘Housing and Life Experiences’ study, expressed a preference for loans over a guarantor. However, because in a guarantor scheme costs would be cheaper for the tenants and the costs are similar for the government, we suggest a more detailed consultation is put in place on both options before either is adopted.

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2. | Cost calculations

2.1. | Costs to governmentWe have calculated, based on generous assumptions, that the total amount of government borrowing needed to support the Access to Rent scheme would be between £102,033,058 and £153,049,587. As the outlay would be loaned, the majority would be paid back to the government, including a 1% administration fee. The total borrowing of Access to Rent equals just 10% of the pledge of a further £10 billion to support the Help to Buy Equity Loan scheme (Gov.co.uk, 2017).

We propose that the government underwrites the defaults of the scheme. Due to the low-income levels of the group being lent to, we have projected this at 20%. This is much higher than average personal loan default rates but closer to payday lending default levels. The total cost of underwriting the scheme at this default rate, for helping 192,864 households into accommodation, would be £20,406,611 to £30,609,917. It equates to just 0.6% of the £3.6 billion spent by central government on housing and the environment in 2016/17 (HM Treasury, 2017).

Table 1 below shows the cost analysis of the loan scheme from the government’s point of view, and the likely uptake of loans.

Table 1: Cost analysis of deposit loan provision per year, based on full take-up by those eligible

Costs Used

Deposit: One

month’s rent

Deposit: Six

weeks

rent

Lower quartile private monthly rent (average UK) £511.00

Source: Private Rental Market Statistics, ONS

Average size of tenant loan £511.00 £766.50

Average length of loan (months) 20

Number of households in lower quartile income bracket

4,018,000

Source: ONS "The Effects of Taxes and Benefits on Household Income, 2015/16 - Reference Tables"

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Percentage of total households in the private rented sector

30%

Source: ONS "The Effects of Taxes and Benefits on Household Income, 2015/16 - Reference Tables"

Number of low-income households in the private rented sector

1,205,400

Likely up-take of loan 32%Source: Shelter PRS Survey 13/14

Likely up-take of loan per year 50%Based on 50% of those tenants moving each year.

Number of households taking out the loan

192,864

Total cost of scheme £98,553,504

£147,830,256

Government borrowing

Size of borrowing to cover scheme £98,553,504

£147,830,256

Two-year gilt bond annual coupon rate 1.75% Source: Bloomberg

Total cost of borrowing £102,033,058

£153,049,587

Cost of scheme to individual tenantAnnual Interest rate charged to tenant 5%

Monthly Interest rate 0.41%

Monthly repayment by tenant £26.98 £40.47

Total repayment over the life of the tenancy per household £532.87 £799

.31

Total repayment by all households £102,772,188

£154,158,283

Total repayment by tenants to cover the cost of government borrowing and allow for a small administrative cost

£739,130.30

£1,108,695

20% default rate (estimated unrecoverable £20,406,6 £30, Source: Default rates

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costs) 11 609,917

on payday loans to take into account financial vulnerability of those being loaned to. https://www.guarantorloancomparison.co.uk/guarantor-loans/a-guide-to-default-rates-for-loans.

2.2. | Costs to the tenantThe financial modelling has been based on a couple with two young children. In this family, one parent is working full time, the other part-time. Both parents’ income is in the lower quartile level. The table below lists assumptions on:

Monthly rent levels, modelled at the lower quartile levels by different regions in the UK

Gross disposable income per month, modelled at the lower quartile level (ONS, May

2017). The monthly income includes money generated from employment and other social

benefits offered by the government as part of its effort to redistribute income to low-

earning households

Average tenancy deposit required at the start of a tenancy, we have modelled this as

being equivalent to both one month’s and six weeks’ rent

The average length of tenancy in months is modelled by different regions in the UK based

on the July 2017 YourMove data release. The YourMove data is lower than the English

Housing Survey tenancy length of 4.3 years average private sector residence. We have

opted for the YourMove data as it gives us local figures, these averages range from 17 to

24 months.

Table 1: Costs used for Illustration

Region

Lower quartile monthly PRS rent

Gross disposable income per month - lower quartile

JRF minimum income standard

Average tenant deposit (six weeks’ rent)

Average length of tenancy (months)

Hull £390.00 £1,437.50£1,898.2

8£585

17

Fife £450.00 £1,750.00£1,898.2

8£675

17

Belfast £512.00 £1,812.50£1,898.2

8£768

18Central London £2,535.0 £2,250.00 £1,898.2 £3,803 20

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0 8

Inner South-East London £1,100.0

0 £2,250.00£1,898.2

8£1,650

20

Outer North-East London £1,250.0

0 £2,250.00£1,898.2

8£1,875

20

Oxford £1,000.0

0 £1,562.50£1,898.2

8£1,500

22

North Wales £475.00 £1,812.50£1,898.2

8£713

24

The loan amount offered will be the tenancy deposit, capped at six weeks’ rent. The instalments of the loan will be paid monthly by the tenant, over the period of the tenancy. Different levels of interest have been modelled, taking into account the average length of tenancies in the different regions.

The longer the repayment period, the lower the monthly repayment costs. Therefore, a loan that extends for longer than 12 months will be beneficial for tenants. As the average tenancies are longer than 12 months, offering a loan for more than this period should not be detrimental to landlords or the government. However, a loan shorter than 12 months will make it much harder for the tenant to make the repayments.

While there is no concrete figure on the affordability of private renting, ONS research has found a median figure of 30% of monthly income spent on rent at an affordable level. Tenants in London and the South East pay significantly more than 30% of their monthly income on rent, and this is reflected in the rental markets in those regions.

2.3. | Analysis of how an Access to Rent loan would work in practiceTable 2 below shows the total housing costs (rent plus repayment of deposit loan) per month, at differing levels of interest rate on the deposit loan.

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Table 2: Deposit loan repayments as a percentage of income (one month’s deposit)

RegionTenancy deposit loan (£)

Average length of tenancy (months)

Monthly repayments with annual interest rate (£)

Total housing costs (monthly rent + monthly repayment of loan) at differing

interest rates (£)

0% 5% 10% 20% 0% 5% 10% 20%

Hull 390 17 22.94 23.79 24.62 26.23 412.94 413.79 414.62 416.23

Fife 450 17 26.47 27.45 28.41 30.27 476.47 477.45 478.41 480.27

Belfast 512 18 28.44 29.56 30.65 32.76 540.44 541.56 542.65 544.76

Central London 2535 20 126.75 132.24 137.63 148.10 2,661.75

2,667.24

2,672.63

2,683.10

Inner South-East London 1100 20 55.00 57.38 59.72 64.27 1,155.0

01,157.3

81,159.7

21,164.2

7Outer North-East London 1250 20 62.50 65.21 67.86 73.03 1,312.5

01,315.2

11,317.8

61,323.0

3

Oxford 1000 22 45.45 47.61 49.74 53.88 1,045.45

1,047.61

1,049.74

1,053.88

North Wales 475 24 19.79 20.82 21.82 23.80 494.79 495.82 496.82 498.80

Table 3: Deposit loan repayments as a percentage of income (six weeks’ deposit)

Region

Tenancy

deposit loan (£)

Average length of tenancy (months

)

Monthly repayments with annual interest rate (£)

Total housing costs (monthly rent + monthly repayment of loan) at differing interest rates

(£)

0% 5% 10% 20% 0% 5% 10% 20%

Hull £585 17 £34.41 £35.69 £36.93 £39.35 £424.41 £425.69 £426.93 £429.35

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Fife £675 17 £39.71 £41.18 £42.62 £45.40 £489.71 £491.18 £492.62 £495.40

Belfast £768 18 £42.67 £44.34 £45.97 £49.14 £554.67 £556.34 £557.97 £561.14

Central London £3,803 20 £190.13

£198.36 £206.44 £222.16 £2,725.1

3£2,733.3

6£2,741.4

4£2,757.1

6Inner South-East London £1,650 20 £82.50 £86.07 £89.58 £96.40 £1,182.5

0£1,186.0

7£1,189.5

8£1,196.4

0Outer North-East London £1,875 20 £93.75 £97.81 £101.80 £109.54 £1,343.7

5£1,347.8

1£1,351.8

0£1,359.5

4

Oxford £1,500 22 £68.18 £71.42 £74.61 £80.82 £1,068.18

£1,071.42

£1,074.61

£1,080.82

North Wales £713 24 £29.69 £31.22 £32.74 £35.70 £504.69 £506.22 £507.74 3510.70

Tables 3 and 4 below show the effect of different interest rates on the deposit loan for deposit amounts of one month’s and six weeks’ rent. The figures show the proportion of housing cost to monthly income level. The second column shows the current scenario, with monthly rents as a proportion to monthly income assuming there is no deposit scheme. However, under these circumstances the tenant would be paying the deposit as a lump sum at the start of the tenancy. The subsequent columns show the effect of different interest rates on the loan.

Table 4: Rent and deposit loan repayments as a percentage of income: one month’s deposit

RegionMonthly rent with no deposit repayments as % of income

Interest rate level of deposit loan

Interest rate level of deposit loan

Interest rate level of deposit loan

0% 5% 10%

Hull 27.13% 28.73% 28.79% 28.84%

Fife 25.71% 27.23% 27.28% 27.34%

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Belfast 28.25% 29.82% 29.88% 29.94%

Central London 112.67% 118.30% 118.54% 118.78%Inner South-East London 48.89% 51.33% 51.44% 51.54%

Outer North-East London 55.56% 58.33% 58.45% 58.57%

Oxford 64.00% 66.91% 67.05% 67.18%

North Wales 26.21% 27.30% 27.36% 27.41%

Table 5: Rent and deposit loan repayments as a percentage of income: six weeks’ deposit

RegionMonthly rent with no deposit repayments as % of income

Interest rate level of deposit loan

Interest rate level of deposit loan

Interest rate level of deposit loan

0% 5% 10%

Hull 27.13% 29.52% 29.61% 29.70%

Fife 25.71% 27.98% 28.07% 28.15%

Belfast 28.25% 30.60% 30.69% 30.78%

Central London 112.67% 121.12% 121.48% 121.84%Inner South-East London 48.89% 52.56% 52.71% 52.87%

Outer North-East London 55.56% 59.72% 59.90% 60.08%

Oxford 64.00% 68.36% 68.57% 68.77%

North Wales 26.21% 27.84% 27.93% 28.01%

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The figures above confirm that the rental market in London and the South East is unaffordable for those on low-income levels, with or without deposit repayments.

There are regions in the North, Scotland and Northern Ireland that can currently be deemed affordable, where the rent levels compared to income levels are lower than 30%. For example, in Hull, renters currently pay 27.13% of their income on housing costs.

The figures above show that borrowing the equivalent of one month’s rent is more affordable for those out of London and the South East, and a 10% interest rate on the deposit loan would be feasible. Borrowing the equivalent of six weeks’ rent is affordable for those out of London and the South East at 5% interest rate on the loan. This interest rate will cover inflation during the period of the loan.

2.4. | Other cost advantages While the Access to Rent scheme is not targeted solely at those directly at risk of homelessness, its aims are to support people on low incomes in finding more suitable accommodation. Crisis found that 80% of homeless people surveyed encountered problems raising money for a deposit (Batty et al, 2016). The scheme is therefore likely to reduce the number of homeless cases and of those living in temporary accommodation.

The number of households in temporary accommodation has been rising consistently.

According to BBC figures based on freedom of information requests, provision of

temporary accommodation across England, Scotland and Wales cost £851m in 2015

alone (Buchanan and Woodcock, 2017). The default costs of Access to Rent would

equate to only 2.3-3.5% of the total spend on temporary accommodation.

The costs and causes of homelessness vary by the location, type and nature of support

provided by homelessness services. Crisis estimated that preventing homelessness for

one year would result in a reduction in public expenditure of £9,266 per person (Pleace

and Culhane, 2016). As Table 6 below shows, Access to Rent would only need to prevent

3% of all homeless cases across the UK to pay for the estimated default costs.

Table 6: Reduction in homelessness needed to cover default costs of Access to Rent

Regional Homeless cases per year Source

Scotland 25,123* cases were assessed as unintentionally homeless

Source: National Statistics: HOMELESSNESS IN SCOTLAND: 2016-17

England 59,260* households as being statutorily homeless and agreed to house them

Source: DCLG, Statutory homelessness live table 770, 28 November 2017

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2016 to April 2017.Wales 10,884* households were

assessed as homeless and owed a duty to help secure accommodation 2016 to April 2017.

Source: Statistics for Wales: Homelessness in Wales, 2016-17 (2017)

Northern Ireland 11,202*  households were assessed as homeless as having Full Duty Applicant status 2015/16

Source: The Homelessness Monitor: Northern Ireland (2016), Crisis

UK Total 106,469

Cost to the public purse based on £9,266 per person

£986,541,754 Source: Pleace and Culhane (2016)

Number of homeless cases that need to be reduced to recover default costs (£30,609,917) of Access to Rent

3303 cases (3%)

* Organisations such as Shelter and Crisis have long argued that the official statistics do not give a full picture of homelessness in England. The figures exclude those who are homeless but who do not approach a local authority for assistance and those who do not meet the statutory criteria.

Case study 1: L’Avance Loca-Pass

In France the ‘L’Avance Loca-Pass’ is an interest-free loan scheme for a tenancy deposit. It can be repaid over up to 25 months with a maximum loan of €500 / £442. Applicants can apply for the loan up to two months after moving in. To be eligible, applicants have to be under 30 and must be either in:

a professional training contract looking for a job; or a salaried student, three-month plus short-term job contract (or an accumulation of them in the past

six months currently in an internship; a student in receipt of grant.

The property can be furnished or unfurnished and it can be shared accommodation (in which case applicants can only apply for a share of the deposit).

If applicants move out before the end of the tenancy agreement, tenants have three months in which to repay the balance with a minimum payment of €20/£17.68 per month. Applicants can also apply for a loan on a new private rented sector property if they are up to date with their payments for the loan for the previous property (Action Logement, 2017a).

The deposit scheme is funded by the Action Logement (Adil25.org, 2010) and a tax of 0.45% on the wage bill of employers with more than ten staff (Ministere du Logement, Feb

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2017) . Action Logement invests in housing, divided between construction, social intervention, and financing of public policies. This includes facilitating access to rented housing.

An advantage of this scheme is that it enables more consistent access to loan support for applicants, as it is available on a national basis. It is however limited in scope due to the restrictive eligibility requirements.

There is also a landlord incentive scheme, the ‘garantie loca pass’. This was recently explored by the Cambridge Centre for Housing and Planning research on behalf of JRF in its international policy review of landlord incentives (Clarke and Oxley, October 2017). This provides three-year insurance for landlords covering up to nine months’ rent/charges (up to €2,000 per month). This scheme is focused on incentivising landlords to house more vulnerable groups, rather than lowering the up-front costs of a tenancy (Action Logement, 2017b).

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3. | ‘Housing and Life Experiences’ study

The ‘Housing and Life Experiences’ study found that for participants on low incomes the private rental sector was often cited as their only housing option, given the lack of social housing and the unaffordability of home ownership. The private rented sector was usually more accessible in comparison to other tenures, in as much as there were no waiting lists, and frontloaded payments (deposits, agents’ fees) were less than a homeownership deposit.

Nevertheless, participants in the study found that costs in the private rented sector occurred at the start of a tenancy: finding a deposit, paying agents’ fees, and losing deposits or fees. These up-front costs contributed to anxieties about insecurity expressed by some in the private rented sector. Deposits were therefore widely seen to be a particular barrier to accessing private rented housing; this resulted in many having to stay in unsuitable or over-crowded accommodation. Where money for a deposit had been raised, the cost was seen as a significant drain on financial resources and a cause of ongoing debt.

Several participants said they were not able to move into more suitable or more affordable properties because they could not pay the deposit. For example, one participant’s nephew was unemployed and could not move out as he had not the funds to cover a deposit. Another participant’s son earned £250 a week and pays £40 child maintenance. He could not afford a deposit in the private rented sector, despite finding properties where he could afford the rent. There was a further example of an interviewee taking a property that was not suitable, but had a low deposit - he felt forced to take it as it was his only option.

Specific examples from the ‘Housing and Life Experiences’ study of those experiencing affordability difficulties in finding private-rented sector deposits included:

Jackie - who reported that she had paid between £6,000 and £7,000 (which included six

months’ rent in advance) when she first moved into her studio flat. She believed the high

deposit requested by the landlord was intended to discourage people on low incomes or

benefits. She used the small amount of equity she had left from the sale of her flat once

her mortgage arrears had been paid.

John – who said “…we just couldn’t afford anywhere when we were at her mum’s. That’s

why we’d save up. It’s all the fees and deposits and everything else you’ve got to put

down on houses. It’s these private landlords. I’d love to move into a council house, but the

list system is ridiculous at the moment...When we were at her mum’s we bid every week

for, I think it was a year, and we got nowhere”.

The ‘Housing and Life Experiences’ study also noted that in some instances individuals had been able to move into a property without a deposit or fees, but that this was usually because the landlord was known to them. There was evidence that participants had been able to access any government, local authority or other schemes to assist with deposits.

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3.1. | Views of low-income study participants on the proposalAs part of the third wave of interviews for the ‘Housing and Life Experiences’ study, participants were asked for their views on the following ideas aimed at supporting tenants with the costs of a deposit:

Capping the maximum amount of rent required by a landlord for a deposit - for example,

one month’s rent.

A deposit guarantee scheme.

A low-cost deposit loan scheme.

Developing a transferable deposit mechanism/deposit overlap scheme for people moving

between private rental homes.

Creating a government-backed insurance scheme, instead of a one-off deposit payment

to the landlord.

Reviewing tenant’s payment history (that is, whether or not the tenant had been in

arrears/had late payments) to inform the level of deposit/bond payments (for example,

requiring a lower deposit if the tenant had paid their rent on time in a previous tenancy).

Support for a scheme to help tenants overcome the affordability of deposits was seen extremely positively by respondents as having the capacity to significantly benefit those involved. The majority of interviewees scored the idea four or above out of five in relation to how much it could make a difference to them.

From the feedback provided we learned that:

In general, respondents welcomed the idea of a cap on deposits which could help reduce up-front costs. The majority thought a one-month cap would be an appropriate amount that could work best for landlords and tenants. One interviewee said, “People simply don’t have £500 needed to put on a deposit.” Another interviewee mentioned having to pay £2000 for a deposit.

There were mixed view among interviewees on the idea of an insurance scheme. Some questioned whether an insurance scheme would generate the desired behaviours associated with a deposit. From a landlord perspective there were concerns it could make people less likely to look after their property.

Although a minority of respondents liked the idea of reviewing tenants’ payment histories to establish the level of deposit, the vast majority of interviewees did not endorse the proposal. This was generally because it was deemed unfair: it could ’punish‘ those who found themselves facing financial difficulties through no fault of their own. One respondent described how “…they always say you are two paycheques away from being homeless or jobless or nothing, so I don’t know about that one [proposal] to tell you the truth…”

Both the loan and guarantor schemes were seen very positively, especially by those who thought that a cap on deposits would still mean that they would not have sufficient cash for a deposit. When questioned specifically, respondents replied that would like to see

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such arrangements sponsored or administered by local authorities. Some had difficulty in seeing how a guarantor scheme would work in practice, and several did not think landlords would be happy with accepting a guarantor instead of a deposit.

Specific comments in support of low-cost loans included:

“It’s the only way people are going to get anywhere.” – this participant was very supportive of the idea of a loan for a deposit, particularly for young people trying to get a place of their own. She spoke about her son who had recently looked at a flat where the landlord wanted a month’s deposit, and her son simply couldn’t raise the money. For him home ownership is out of the question so he is living with his grandparents. – Northern Ireland, midlife woman (early 40s), single parent.

“Yes, good idea as long as it is affordable … could not afford the month’s deposit if needed … useful for younger people, instead of asking the parents!” - Hull, owner, midlife, couple with children

“– ‘a great idea as I could move straight away rather than wait 6-7 months to save up’. - Hull, private rented sector, young, single male parent

“Would prefer to pay by instalments because it’s not so much money up-front. It’s a nice idea, it would help a lot of people. It would be easier to move if you found yourself in a situation of poor housing because you wouldn’t have to save up”. - Northern Ireland, private rented sector, couple with a dependent child in overcrowded accommodation

“Private rented is accessible otherwise, so assistance with deposit would be helpful to people who do need housing quickly and can’t find the deposit and who otherwise would be in temporary accommodation/homeless/staying with family etc. waiting for a social property”. – Oxford, social sector, female, single parent

One other participant also talked about the policy’s ability to help those who face homelessness as, when she was homeless, she did consider the private rented sector, but was put off by the size of deposit required which she couldn’t raise without borrowing and ‘paying over the odds in repayment costs’ – young single parent, Northern Ireland

Case study 2: Shelter’s Bristol pilot

In mid-2017 Shelter is piloted a specialised deposit scheme in Bristol, in partnership with the Bristol Credit Union. The scheme has been introduced in recognition of chronic homelessness in the city and the increasingly limited options available to homeless families – there are currently approximately 10,000 people on a waiting list for 41 council homes in the Bristol area.

The scheme targets families considered to be ’intentionally homeless‘. These families are typically trapped in poor-quality temporary accommodation due to their financial circumstances (for example, previous rent arrears and/or low incomes). Families in this situation are not content with their living situation but are unable to ‘escape’ to other accommodation due to the lack of availability of council housing and prohibitively expensive deposit requirements for privately-rented properties.

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As with other such schemes, the Shelter pilot provides loans to families to pay for a deposit enabling them to enter private rented sector accommodation. The loan is offered at low interest to ensure that it is genuinely repayable by families in precarious financial positions.

Where the scheme differs from typical loan schemes is in its provision of tenancy support before and after the loan. Prior to receipt of the loan, prospective tenants will have to demonstrate to support workers that they have taken steps to become ’tenancy ready‘, such as having a debt plan in place or having discussed existing arrears with advisers. Tenants are provided with individualised support plans outlining steps they will need to take to fulfil their obligations as part of the bond agreement. This approach ensures as far as possible that tenants are able to achieve financial sustainability and that landlords receive rent payments in a timely manner.

So far, one household has become involved in the pilot; a further nine are expected to become involved over the next six months. Shelter intends to extend the pilot within the Bristol area to other groups such as young single adults, if it is successful (Gerada and Walster, 2017).

Key implications: Having considered the responses from the study participants we immediately opted to

remove the ‘payment history’ element from the scheme before embarking on additional research.

The deposit loans and guarantors scheme both had consistent support. Repayments on any loan scheme would need to be affordable. A cap on deposits was very popular, although most felt one month’s rent was more

reasonable than the six weeks’ rent proposed by the government. The cap should therefore be applied throughout the UK by respective governments to ensure consistency.

The scheme could have merit in tackling rising homelessness levels and the increasing cost of temporary accommodation.

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4. | Additional research findings

4.1. | Key issues

4.1.1. | Structure and affordability of the private-rented sector The number of privately rented homes is nearly 5 million. This figure has almost doubled since 2002 (Strong, 2015). The private rented sector in England has steadily increased to 20% of housing stock in 2015, overtaking the social-rented sector in size. This growth in private renting represents a significant change in the structure of housing stock, particularly over the past ten years.

Along with this growth, the composition of the private rented sector has also undergone some restructuring. One growth area is the number of low-income households dependent on private rented housing for a home. One-third of people in poverty now live in the private rented sector, which has increased by 40% in the last decade (JRF, 2017). There have also been changes in the number of families reliant on the private rented sector for a home. Over the last decade, the number of families, as defined by households with children, within the private rented sector in England has grown by 6% to 36% (English Housing Survey, 2016). 

Renting in the private sector is expensive. In England, households living in the sector on average spend more of their monthly expenditure on housing (35%) than those who are social renters (29%) or owner-occupiers (18%) (Strong, 2015). A recent survey also found that 40% of renters spend more than 50% of their incomes on rent (Knight Frank, 2017). People on low incomes therefore face several challenges in the private rented sector. This includes difficulty accessing quality accommodation, lack of security and affordability (Knight Frank, 2017).

A landlord does not legally have to ask for a security deposit (and for this reason a small minority choose not to) but the basic purpose is to give them a level of protection against excessive wear-and-tear of the property by a tenant, rent arrears and cleaning. Most landlords typically require a full month’s rent in advance and four to six weeks’ rent as a deposit. Tenants also have to fund the cost of a move and pay other associated fees. These frontloaded costs are particularly difficult for those on low incomes; many are forced to borrow money to cover these outlays, with many beginning their tenancies in considerable debt.

According to a survey undertaken by the Tenancy Deposit Scheme, four in ten tenants said that they needed to borrow money to pay a tenancy deposit. (Lunn, 2013). According to Shelter, the last time they moved a total of 255,944 private renting families took on debt in the form of credit cards, overdraft, bank loans or payday loans (25% of those who had moved). This included 133,352 using their credit cards (13%) and 111,026 their overdraft (11%) (Shelter, September 2017). 

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This problem is worse for those who make multiple moves in a short period. 322,120 private renting families moved home three or more times in the past five years. This represents 20% of all private renting families in England (Shelter, September 2017). 

As noted by the participants in the ‘Housing and Life Experiences’ study, the increasing cost of rental deposit is often a significant barrier to accessing private rental accommodation. Government data shows deposits have increased by approximately 7% in the last five years. The average deposit currently stands at £1,070 (Mydeposits, June 2017). This rise in expense has been linked to higher rents and the increasingly common practice for private landlords to require a higher security deposit. Six weeks’ or two months’ rent has become the norm for landlords wishing to safeguard against tenants leaving without paying their last month’s rent.

Shelter noted in their recent report on the private rented sector that 3% of tenants who do not receive housing benefit have been refused or prevented from moving into private accommodation because they cannot afford the deposit or rent in advance. For those in receipt of housing benefit this rose to 10% (Shelter, 2017). Research commissioned by the Residential Landlords Association and undertaken by Sheffield Hallam University (Pattison and Reeve, 2017) found that 79% of landlords who let to under-35s cited the higher risk of rent arrears as a reason for reducing the numbers in this age-group that they took on as tenants. Two-thirds of landlords were also not willing to let to under-35s on housing benefit or universal credit, and 44% were not willing to let to students. When asked what would encourage them to increase lettings to under-35s, four out of five said they would be more willing to let to under-35s with a bond or rent deposit scheme (Pattison and Reeve, 2017).

It is currently common practice for landlords to charge low-income households a higher deposit than the conventional 4-6 weeks’ rent equivalent usually asked for (Shelter, 2017 and Wilson, 2017). There is therefore a very real and pressing concern that an unintended consequence of the government’s deposit cap could be that landlords are less inclined to rent to more vulnerable groups. This could lead to increased homelessness and destitution. A solution must be to provide more support to those on low incomes to afford the up-front cost of a tenancy. Introducing an ‘Access to Rent’ scheme could provide landlords with greater assurance that tenants on low incomes can manage the associated costs of renting.

4.1.2. | Homelessness preventionCrisis found that 80% of those homeless people surveyed encountered problems raising money for a deposit (Batty et al, 2016). With high house prices making home ownership out of reach for many, and social housing hard to access, millions of people have been left with no choice but the private rental sector. However, if deposits are a barrier to renting, that leaves some people with no housing choices at all.

Homelessness across the UK has been rising. According to the Local Government Association many councils are finding it difficult to provide suitable accommodation for households facing homelessness at a cost that is sustainable.

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While the Access to Rent scheme is not targeted solely at those directly at risk of homelessness, its aims are to support people on low incomes in finding more suitable accommodation. It is therefore likely to reduce the number of homeless cases and of those living in temporary accommodation.

The number of households in temporary accommodation has been rising consistently. There are around 77,240 households in temporary accommodation, including 120,540 children. This is a 25% increase in London (now 54,280 families), and 52% increase outside of London (now 22,950) since 2014 (Local Government Association, 2017). According to BBC figures, based on freedom of information requests, provision of temporary accommodation across England, Scotland and Wales cost £851m in 2015 alone (Buchanan and Woodcock, 2017).

The costs of homelessness vary by the location, type and nature of support provided by homelessness services. For the NHS and criminal justice system, the additional costs centre on the greater likelihood of more frequent and sustained contact with some single homeless people compared to other citizens. Crisis estimated that preventing homelessness for one year would result in a reduction in public expenditure of £9,266 per person (Pleace and Culhane, 2016), and preventing rough sleeping for one year would result in a reduction in public expenditure of £20,000 per person (Pleace and Culhane, 2015).

4.2. | Recent government proposals under the Draft Tenants’ Fees Bill One idea suggested during the regional workshops that informed this research project was the introduction of a cap on the maximum amount for a deposit. The government have brought forward a draft Tenants’ Fees Bill which will, among other things, cap holding deposits at no more than one week’s rent and security deposits at no more than six weeks’ rent (DCLG, 2017). It is, however, worth noting that these changes are unlikely to be in place until 2019 and will not apply in Scotland and Northern Ireland. In Scotland private rental deposits are already capped at two months’ rent, and further security for private tenants is being introduced. Nothing is currently in place to protect Northern Ireland tenants from excessive deposits. We therefore recommend that a similar cap is put in place in Northern Ireland.

Capping deposits was viewed positively by those in the ‘Housing and Life Experiences’ study when presented as a solution during the third-wave interviews. We therefore feel that the introduction of a cap is a progressive move.

4.3. | Existing support for tenants with deposits

4.3.1. | Current government provision The lack of financial support available for private rented deposits is striking, given the available funding in place for those on higher incomes looking to buy a home. The UK Housing Review demonstrated that, out of projected government investment through to 2020/21, £29bn would go into private sector programmes aimed to support home ownership. This included a £12.5bn bill for the Help to Buy: Equity Loan scheme. Help to Buy ISAs and

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the Help to Buy guarantee scheme make up the remainder of the funding (Perry et al, 2017). In October 2017 it was announced that the government would invest a further £10 billion in the Help to Buy Equity Loan, which helps people buy a new-build home with only a 5% deposit (Gov.co.uk, 2 October 2017).

In this context existing government support for rental deposits is virtually non-existent It merely includes:

Discretionary Housing Payments (DHP) – those in receipt of, or entitled to, housing

benefit can apply to their local council for help with the cost of their deposit. It is a

discretionary fund for councils to help people who are struggling with their housing costs.

However, this funding is expected to help with a range of housing cost shortfalls and

Shelter has noted that only 10% of DHP funding is used for support with deposits (Shelter,

2017).

Budgeting loans - available for benefit claimants who have claimed Income Support,

income-based Jobseeker’s Allowance, income-related Employment and Support

Allowance, or pension credit for the last six months. They are also available to couples

who have earnings below £3,600 in the last six months, or £2,600 for a single person.

However, payments are so high (repayments of up to 40% of a claimants’ Standard

Allowance) for budgeting loans that households are discouraged from taking them out

(Shelter, 2017).

4.3.2. | Deposit guarantee schemesDeposit guarantee schemes are usually run by a council, housing association or charity. Instead of a cash payment, the scheme-provider gives a written guarantee to a tenant’s landlord to cover losses due to unpaid rent or damage. When a tenant signs up to a scheme, they usually agree to repay the council any money it has to pay the landlord or letting agent. If the rent deposit or bond scheme provider pays the tenant’s landlord for any damage caused/rent unpaid at the end of the tenancy, the tenant will be asked to repay the money to the scheme.

In 2010 a survey by the Association of Housing Advice Services (AHAS) found that nearly 80% of local authorities offered a deposit guarantee scheme (Shelter, 2017). From the perspective of tenants, institutional guarantors help reduce the up-front cost of a tenancy without having to find the funds to pay off a loan. The majority of the schemes also offer some form of tenancy support for the individual, allowing them to learn how to manage a tenancy and giving further guarantees to the landlord about the tenants’ ability to sustain the tenancy. These schemes have proved successful, especially in helping people who are homeless access sustainable accommodation (Morton and Tom, 2017), clearly there is scope for investment in expanding these scheme as called for by Crisis.

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However, local authorities we interviewed expressed concerns about being able to offer this service at scale. Their concerns focused on the risk of mission creep, with experience of private landlords expecting a relationship with the local authority guarantor and responsibility for the tenant beyond the deposit guarantee, which the authority did not have the resources to maintain on a larger scale. Half of the credit unions we spoke to and the building society representative we spoke to felt that they could not put in place the tenancy support needed to offer guarantees.

A further barrier to the guarantee approach is that some landlords may still be reluctant to lend to tenants on this basis due to concerns about how easy it is to obtain money from the scheme compared to the assurance provided by a cash deposit. Feedback from private landlords and their representatives was that there would still be a significant number of landlords who would not accept a guarantee instead of deposit as landlords prefer the cash to be held in a conventional deposit scheme. There is a risk that a guarantees scheme would not be sufficient incentive for private landlords to let to those on low incomes. Landlords felt this was especially the case for those tenants perceived to be ‘high risk’ due to age, income or reliance on benefits.

4.3.3. | Deposit loan schemes Local deposit loan schemes are in place across the UK. However, many are limited in scope and usually focused on those at immediate risk of homelessness or the most vulnerable tenants. Despite these schemes being available, none of the participants in the ‘Housing an Life Experiences’ study were aware of deposit schemes in their area.

These schemes typically involve the lender (usually a local authority, housing association or charity) paying the value of the deposit to the landlord, with the money being lent to the tenant in advance so that they pay it back to the lender over a period of time with a low to medium interest rate. If there are no problems, the tenant will get their deposit back at the end of the tenancy. Interviews with a small sample of providers of such schemes suggested that they are successful in supporting those who can access them. However, they stated that schemes are unable to expand due to lack of funding available to support the lending, and in some cases due to the risk of lending to low-income client groups. This meant providers had to pass the costs of the perceived default risk on to the borrower to make sure the scheme ‘stacked up’, creating unaffordable repayment expectations on the borrower.

No consistent information has been collected on the provision of deposit loan schemes, but research undertaken by AHAS in 2010 suggests 80% of local authorities surveyed offered a loan deposit scheme to those at risk of homelessness (Crisis, 2017). A review of publicly available information on 15 local authority deposit support schemes across the UK suggested that all operated as part of their homeless prevention work, with 12 out of the 15 requiring the tenant to fill out a homeless application and be assessed as at risk of homelessness within 28 days to have access to the loan.

Other schemes available often focused on specific groups, for example, the Refugee Council Housing Resettlement and Deposit Guarantee Scheme offers a loan restricted to refugees. SSAFA Forces Help offers a scheme for those currently or previously serving in the forces.

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In some areas supported housing providers offer deposits to particular vulnerable client groups such as ex-offenders.

Eligibility to access loans at credit unions also varies, with some insisting that members should have regularly saved for several months first (Saxon, 2017). Interest rates at credit unions are variable. Sometimes loans can be under 6% a year, but the interest is often around 12.7% APR (1% a month) going up to a maximum 42.6% APR (3% a month). While these rates are certainly lower than most payday loans, they are higher than the cheapest credit cards or personal loans available to those with higher incomes (Saxon, 2017). It can still be a struggle to service such loans for those on low incomes. There are examples of credit unions offering no or low-interest loans for deposits, however, these usually need tenancy support to be in place to help mitigate the risk of non-payment. Shelter is piloting such a scheme in Bristol in partnership with a credit union to link a deposit loan with tenancy support (see case study 2 below).

Other organisations have partnered with credit unions to offer broader affordable borrowing and saving support for employees, regardless of contract type, which could also be used to pay a rental deposit. This is an arrangement in place with the Joseph Rowntree Foundation (JRF) and Joseph Rowntree Housing Trust (JRHT), who have partnered with the Leeds Credit Union. Under this scheme JRF/JRHT underwrite lending to staff. The scheme allows staff access to a reduced interest rate of 4% APR for loans of over £500. This is referenced as a case study below. Loan repayments or deposits into Leeds Credit Union savings accounts are then deducted automatically from their payroll (JRF, 2013). Shelter has also developed an employee benefit deposit loan scheme (also described below).

While low-cost employee loan schemes are a positive innovation, access to employee benefit loan schemes are more likely to benefit those in secure employment and are often unavailable to those working on low incomes, who are self-employed, and/or on zero-hour contracts. More could be done to encourage this solution so more employees can access it, but it will not benefit those out of work, those who are self-employed, or those working in small businesses which do not have the capacity to provide such a scheme to employees.

Crisis maintains a database of what it calls ‘Help to Rent’ schemes which are usually either deposit schemes or guarantor schemes, this database is publicly available here: http://www.crisis.org.uk/find-pr-scheme.php .

Case study 3: Shelter Rental Deposit Loan Scheme

A Rental Deposit Loan Scheme is an employee benefit offered by some employers whereby staff are able to take out an interest-free loan to cover the cost of their deposit when moving into privately rented accommodation. The loan is taken out of the employee’s salary and repaid in instalments via monthly salary deductions, most commonly over a 12-month period. These schemes have become increasingly prevalent as privately-rented accommodation has doubled since 2010, and now houses 20% of all households in England (English Housing Survey, 2015/16).

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Given that the loans are repaid in full over the course of the repayment period, the costs of implementing this benefit are minimal, and are generally limited to the opportunity cost of investing or saving the money elsewhere. Shelter has calculated that, for its organisation (of about 1,000 employees), the annual opportunity cost is just £195 for the entire scheme. Additional administrative costs are estimated to be minimal. Risks are minimised by stipulating that the landlord must hold the rental deposit in a tenancy deposit protection scheme and the lending organisation should specify that it is not liable for any end-of-tenancy deductions. In addition, recipients of the rental deposit loan should formally agree that any outstanding loan amount at the end of the repayment period can be deducted from their next pay packet.

Organisations are able to estimate the cost of the scheme to their organisation by making calculations based on a number of assumptions including average rental deposit, the percentage of people who borrow a deposit, and the estimated number of borrowers per region. Shelter has compiled these assumptions based on a range of census and survey data. Because HMRC rules allow staff to borrow up to £10,000 tax-free from their employer, in the vast majority of cases employees will not have to pay any tax on their loan. It is recommended that the rental deposit loan is capped at the equivalent of two months’ pay for each employee to mitigate the risk of repayment failure.

Schemes of this nature have had some uptake, with the Ministry of Defence and Department for Communities and Local government among the early adopters. Others include the Co-op and Starbucks. In 2015, then-Housing Minister, Brandon Lewis, announced government-wide support for the scheme.

4.3.4. | Deposit replacement insurance schemesAs noted previously, a solution proposed as part of the policy development phase of the project was a government-backed deposit replacement insurance scheme. From our external review we learn that there are some companies who are utilising insurance as an alternative to the traditional deposit. Through these schemes a tenant typically pays a non-refundable insurance premium (usually around £100 - £150) before they sign the tenancy agreement. This is notably lower than the four to six weeks’ rent typically required as a deposit. This insurance product acts in place of a deposit and, should the tenant go into rent arrears or damage the property, the landlord will be able to claim on the policy. Examples of insurance providers on the market include Dlighted, InsureStreet, Zero Deposit Scheme (ZDS) and Reposit (Lunn, 2017). The latter is described below as a case study. Note that Dlighted charges the insurance premium to the landlord rather than the tenant. However, to be eligible tenants have to be granted ‘trusted tenant’ status.

These insurance products have the advantage of reducing the overall up-front costs for tenants. However, feedback from stakeholders working in or with the private rental sector was critical of the insurance approach. These concerns mirrored those featured in a recent white paper produced by Mydeposits in June 2017, the findings of which are summarised below:

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Compared to a loans scheme, in insurance schemes the tenants do not get the money

they pay out back.

These products are relatively new and it is unclear if premiums will increase or

underwriting insurers will withdraw from the market should a substantial number of claims

emerge.

Tenants are still liable to pay the landlord at the end of the tenancy for any excess. If a

financially distressed tenant does not have access to the money required, insurance

schemes are likely to deduct the money from the tenant’s credit/debit card in any case, or

employ the services of debt collectors.

There is a risk that these schemes could create perverse incentives for landlords and

tenants. For example, if the cost of recovery is prohibitive tenants may feel they can get

away with disregarding their obligations. Similarly, if landlords think insurers will pay out

regardless, there is an incentive for them to make a deduction at the end of the tenancy in

any case.

There is little regulation of the schemes in place.

There are additional financial obstacles for both the landlord and the tenant to access the

claim challenge process (Mydeposits, 2017).

4.3.5. | Removal of depositsThrough our external research we found that a minority of landlords and letting agencies are doing away with deposits. For example, in May 2017, Get Living London announced it would return all its 3,000 deposits to tenants, subject to tenant referencing checks or guarantors (usually a home-owning friend or family member) (Get Living London, 2017). We are also aware that Red Door Ventures, a commercial residential developer wholly owned by the London Borough of Newham, is also planning to pilot a zero-deposit scheme. The downside of this approach is that, should a prospective tenant not have an available guarantor, they will still be unable to rent the property without a deposit. Shelter has found that private landlords are increasingly asking for guarantors with expectations that these guarantors would be homeowners and be earning above average salaries. These types of guarantors can be difficult for low-income households to secure (Shelter, 2017). Therefore, while this move towards removing deposits by landlords will reduce the up-front costs of some tenants, the approach will do little to support those on low incomes.

4.3.6. | Transferable depositsAnother idea proposed as part of the research was transferable deposits. Churn in the private rented sector is higher than in other sectors. In England in 2015-6, 787,000 households moved within the private rented sector (English Housing Sector, 2017). An advantage of transferable deposits is that they have the potential to reduce the up-front costs of moving between tenancies as many renters often have to raise a deposit for their new property before they get the previous one back. This expense can force people to borrow

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from high-interest lenders to cover the cost of a move. The idea of transferring deposits involves holding deposits in a trust, so funds can be easily transferred from one tenancy to another.

Such schemes have already been promoted by many landlord trade bodies and other campaign groups. The Mayor of London, Sadiq Khan, recently published his Housing Strategy which states that the Mayor’s Office intends to work on the ’passporting‘ of tenancies to enable the transfer of deposits (Mayor of London, 2017).

There are, however, drawbacks to this initiative. One is that it can only be used in instances where deposits are undisputed. It will also not reduce the up-front costs for low-income people moving into the private rented sector. Having considered the available work in this area we feel it is a positive idea that should be explored further. However, there is also a need for a solution that takes account of the overall affordability of deposits for those on low incomes.

Case study 4: Reposit’s deposit replacement insurance scheme

Under Reposit’s deposit replacement insurance scheme the tenant pays a non-refundable fee of one week’s rent for their first Reposit, which will be a one-off payment for as long as they stay in that property. If there are no problems the premium will reduce throughout the tenant’s renting life, like a no-claims bonus on a car. Their service provides the equivalent six weeks’ rent worth of cover to the landlord for damages, unpaid rent, cleaning costs and any other charges normally associated with deductions from a security deposit.

Tenants can opt for Reposit through their letting agent using e-signature and online payment at the time of signing their tenancy agreement, with the agents earning a sizeable commission for every Reposit sold. Tenants remain wholly liable for damages caused. The Reposit system allows agents and landlords to communicate any charges to Reposit which, they claim, allows them to settle the balance instantly (https://getreposit.uk/).

Key implications

- The existing provision of deposit loans needs to be expanded in scale and scope to meet the needs of low-income households moving into and within the private rented sector.

- Insurance schemes appear to represent an option for tenants who may have to borrow to move home. However, they do not offer a cost-effective solution to the tenants as they do not get their money back, and these are still relatively new and untested products.

- A national guarantees scheme underwritten by the government is a strong option to support with up-front costs. This also overcomes the complication for providers of an Access to Rent scheme having to register with the Financial Conduct Authority, which can be a difficult process.

- Feedback from local authorities and landlords, as well as participants in the ‘Housing and Life Experiences’ study, shows a preference for loans over a guarantor. However, as costs would be cheaper for the tenants and the costs are similar for the government, we suggest a more detailed consultation is put in place on both options

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before either is adopted.

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5. | Conclusions

Considering the growth and structure of the private rented sector in the UK, there is much to do to make it workable and affordable for the increasing number of low-income households who are reliant on it for a home. The Access to Rent proposal does not aim to solve all these issues. However, it does provide an immediate method by which those on low incomes can access the private rented sector in a fairer and more affordable way.

The private rented sector is the only realistic housing option for those struggling to afford to buy a home or access social housing. The Access to Rent scheme is designed to be easy to implement and will tackle the frontloaded costs identified as a financial strain by participants in the ‘Housing and Life Experiences’ study. These costs often bar low-income households from a private rented tenancy, or force them to borrow money at high interest rates to raise a deposit. They begin their tenancies in considerable debt.

The government is taking positive steps by capping deposits to the equivalent of six weeks’ rent. However, this amount is still unaffordable for those on low incomes. A government sponsored low-interest loan scheme that recognises the up-front costs of setting up a tenancy is therefore necessary. By backing the Access to Rent proposal, the government can further support those on low incomes in the private rented sector. The total government borrowing to pay for the scheme will equate to just 10% of the pledge of a further £10 billion for the Help to Buy Equity Loan scheme. It also has the potential to save the public purse by reducing the use of temporary accommodation and other costs associated with homelessness.

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Appendix A | References

Action Logement, (2017a) L’avance loca-pass. Information webpage: Nous avons bénéficié d'un coup de pouce pour le versement de notre dépôt de garantie. [Online] Available at: https://www.actionlogement.fr/l-avance-loca-pass [Accessed: 20 November 2017]

Action Logement, (2017b) La garantie loca-pass. Information webpage: J’ai besoin d'un garant pour louer un lodgement. [Online] Available at: https://www.actionlogement.fr/la-garantie-loca-pass [Accessed: 20 November 2017]

Adil25.org. (2010) Les aides d'Action Logement. [Online] Available at: http://www.adil25.org/se-loger-dans-le-doubs/la-location/les-aides-au-logement/les-aides-daction-logement.html [Accessed: 20 November 2017]

Batty, E, Cole, I, Mike Foden, M, Green, S, Pattison, B, Reeve, K, (2016) Home: No less will do. Homeless people’s access to the Private Rented Sector. Crisis

Buchanan, M and Woodcock S, (2017) ‘Councils spent £3.5bn on temporary housing in last five years’, BBC News, 17 November 2017. [Online] Available at: http://www.bbc.co.uk/news/uk-38016728 [Accessed: 20 November 2017]

Clarke, A and Oxley, M. . (2017) ‘Using incentives to improve the private rented sector for people in poverty: An international policy review.’ Cambridge Centre for Housing and Planning Research Available at https://www.cchpr.landecon.cam.ac.uk/Projects/Start-Year/2017/prs_landlord_incentives/JRF_PRS_Landlord_Incentives_Draft/I_P_Review/at_download/file [Accessed: 20 November 2017]

Croucher, K, Quilgars, D, Baxter, D and Dyke, A (2017a) Housing and Life Experiences: First interviews with a qualitative longitudinal panel of low income households, Second interim report to the Joseph Rowntree Foundation, York: Centre for Housing Policy. 

Croucher, K, Quilgars, D, Baxter, D and Dyke, A (2017b) Housing and Life Experiences: Primary research findings [unpublished] 

Croucher, K, Quilgars, D, Baxter, D and Dyke, A (2018) Housing and Life Experiences York: Joseph Rowntree Foundation. 

Department for Communities and Local Government (2017) Banning letting agent fees paid by tenants: A consultation paper. Available at: https://www.gov.uk/government/uploads/system/uploads/attachment_data/file/607479/Banning_letting_agent_fees_paid_by_tenants_consultation.pdf [Accessed: 20 November 2017]

Elaine, B, Cole, I, Mike Foden, M, Green, S, Pattison, B, and Reeve, K, (2016) Home: No less will do. Homeless people’s access to the Private Rented Sector. Crisis. Available at: https://www.crisis.org.uk/media/237166/home_no_less_will_do_crisis.pdf[Accessed: 20 November 2017]

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