More than one million private landlords in the UK could consider deposit alternatives if changes to the tenancy deposit system lead to greater use of non-traditional options, according to research commissioned by deposit alternative provider Zero Deposit.
The survey of 800 private landlords found that 9% would move directly to a deposit alternative if insured tenancy deposit arrangements were no longer available. Zero Deposit estimates this could represent around 266,736 landlords.
A further 26% said their decision would depend on what their tenants wanted, potentially bringing another 755,751 landlords into the market for alternative deposit arrangements.
However, traditional custodial schemes remain the preferred option for most landlords surveyed, with 64% saying they would choose this approach.
Landlords weigh different options
The findings come as the Government continues to reshape the tenancy deposit system in England.
Under the current arrangements, landlords can use either a custodial scheme, where the deposit is held by the protection provider, or an insured scheme, where the landlord or agent retains the money while paying for protection.
The Government is also preparing for a new tenancy deposit protection system from April 2028. A procurement notice published by the Ministry of Housing, Communities and Local Government says the future system is intended to keep deposits protected while improving the way disputes and returns are handled.
The survey suggests landlords are not necessarily looking for one replacement model.
Zero Deposit chief executive Sam Reynolds said the findings showed landlords were considering different ways of managing risk while responding to changes in regulation and tenant preferences.
Property damage remains a major concern
Protection against damage to rental properties was the most important consideration for 25% of landlords surveyed.
Faster resolution of disputes was the next most important factor, selected by 17%, while 16% identified regulatory certainty as a priority.
Lower costs and reduced administration each attracted 15% of responses.
Tenant affordability was identified by 9%, while only 3% selected cashflow as their main consideration.
The results indicate that any future deposit system will need to address more than the amount of money a tenant pays at the start of a tenancy.
For landlords, protection against losses and a clear process for resolving disputes remain important considerations.
More landlords want to offer tenants a choice
The survey also found that 58% of landlords would prefer to give tenants more than one deposit option if insured arrangements were abolished.
The remaining 42% would rather provide tenants with a single option.
That finding points towards a rental market in which landlords could increasingly offer different ways for tenants to meet deposit requirements, depending on their circumstances.
For tenants struggling to raise a conventional deposit, alternative products can potentially reduce the amount of money required upfront. However, the Government’s current rules make clear that landlords cannot require tenants to pay for a deposit replacement product or other insurance as a condition of renting. Tenants can choose such services themselves.
Deposit protection remains a legal requirement
The survey does not mean traditional tenancy deposits are disappearing from the English rental market.
Under current rules, landlords taking a tenancy deposit for an assured periodic tenancy must protect it through a Government-approved tenancy deposit protection scheme. The maximum is generally five weeks’ rent where annual rent is below £50,000, rising to six weeks where annual rent is £50,000 or more.
The approved system currently includes the Deposit Protection Service, MyDeposits and the Tenancy Deposit Scheme. Landlords must normally protect the deposit within 30 days and provide tenants with information about how it is protected.
The existing framework also provides dispute-resolution arrangements when landlords and tenants disagree about deductions from a deposit.
Changes could reshape the deposit market
The research highlights the range of choices landlords may consider as the Government develops the next phase of tenancy deposit protection.
While traditional custodial arrangements remain the most popular option among those surveyed, a sizeable proportion of landlords said they would consider alternatives or allow tenants to choose between different products.
The eventual design of the Government’s deposit protection system will therefore matter to both sides of the private rental market.
For landlords, the key issues are likely to remain protection against damage, reliable dispute resolution, compliance and cost. For tenants, affordability and the amount of money required before moving into a property will remain important.
The Government’s future approach will determine how those priorities are balanced as England’s private rental rules continue to change.
