How Will A Cap On Deposits Affect The Derby Lettings Market?

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How Will A Cap On Deposits Affect The Derby Lettings Market?

 

Like most people I was really surprised when the government announced in the recent Queens Speech their intention to cap deposits at a maximum of one month’s rent. This will mean a significant change as at AKS Residential our standard deposit is always higher than a month’s rent and the National Landlord’s Association estimate that around 40% of current deposits held are higher than a month’s rent.

There were some questions asked of deposit amounts during the consultation on banning tenant fees that ended in June, but most felt that if anything was done in respect to deposits then we would follow the route taken by Scotland and cap the maximum deposit amount at two month’s rent. In Derby most letting agents ask for a deposit amount equivalent to a month’s rent + £100 so clearly the cap will mean that Landlords have a slightly lower deposit and therefore less security. However given that the vast majority of properties are let on an unfurnished basis anyway I don’t think many Landlords will be overly concerned with only being able to collect a one month deposit.

In my opinion the biggest impact by far is going to be felt by tenants and the cap will end up making it very difficult for some types of tenant’s to rent a property at all. Tenants with pets already find it more difficult to rent a property as many Landlords don’t allow pets and when a pet is permitted a higher deposit is always paid to provide additional security against any damage caused. When deposits are capped at one month, tenants with pets are going to find it significantly more difficult to rent a property as without being able to offer extra security there will be even less Landlords that allow pets.

Tenants that would be considered a higher risk will also now find things significantly more difficult. When a tenant doesn’t quite fit our standard referencing criteria but we feel confident with them we would normally be able to agree with the Landlord for them to still rent the property but to pay a higher deposit to off-set the perceived extra risk. If the government remove tenant’s ability to do this then those who have slightly unorthodox circumstances are going to find things difficult through no fault of their own.

Whilst the announcement has been made, nothing is set in stone yet and the legislation to introduce the cap is probably not going to come in until the second half of 2018. It is still possible that sense will be seen and they will have a rethink but I’m not going to hold my breath! The thinking behind this is to improve affordability for tenants by lowering the upfront amount that they need to pay but whilst Landlords won’t exactly welcome the change it will be certain types of tenants that really lose out.

Thanks for reading and for my information on all aspects of lettings please download a copy of our fee E-Book ‘The Ultimate Guide to Letting your Derby Property here

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