Disrupting the market to help tenants

The internet has already shaken up the music industry, television, taxis and self-catering holidays. Investors are now looking for the next industry to disrupt with technology and property seems ripe for the picking. 

As the national voice of private renters, we agree that the property industry as it stands fails its consumers in too many ways, so things need to change. Even when we succeed in changing the law, like the forthcoming letting fees ban, we still need to ensure that it's implemented properly and the industry adapts in the right way. 

But we can't allow slick and revolutionary new services or initiatives to simply treat tenants as cash cows in the same way that many letting agents and landlords currently do. So this is what we think the market needs - and how the tenant should benefit.

1. References

Assuming the Tenants' Fees Bill makes it through Parliament, letting agents will be banned from charging tenants for references at the start of a tenancy (along with other fees). But giving the landlord assurance that a tenant can pay the rent still needs to happen and agents will want to minimise their costs. 

There are already several services offering "tenant passports" which can be prepared before applying for a property so that the letting agent doesn't have to check the credit score and employment status themselves.  

To work for tenants, this must:

  • Minimise waiting times between making an offer on a home and being approved by the landlord - this can currently take the best part of the week.
  • Be something that stays with the tenant during their time in the rental sector so they can manage it, and know exactly what's in it, and how to improve it, if necessary.
  • Be accepted by all letting agents, no matter what cosy deals they have with other third party providers. 
  • Be free to the tenant, ideally. 
  • Not involve superfluous information such as how frequently the tenant raises requests with their landlord - that could result in landlords rejecting renters with a record of exercising their rights.
  • Allow communication with users about tenants' rights and the redress process - one major barrier to a fairer market is tenants simply being unaware of their rights.

2. Deposit

There are a handful of services that promise to do away with the refundable deposit at the start of the tenancy worth a month's rent (or more), and replace it with an insurance premium worth a week's rent or less. 

This may help many tenants who could not otherwise find the money for a full deposit. But most tenants wouldn't want to pay this if they're in a position to hand over a refundable deposit instead.

To work for tenants this must:

  • Be as cheap as possible, to prevent exploitation. 
  • Not entail any further costs to the tenant if the landlord makes a claim. If a landlord still has to pursue the tenant for damages, what's the point of buying this security in the first place?
  • Be optional. Better still, the existing deposit protection system needs shaking up so that tenants have more control over their deposits - keep it frozen in an account in their name, where it can accrue interest for the tenant.
  • Only be a last resort if the tenant can't access a deposit loan scheme. Starbucks and many public sector employers already offer workers a loan to cover the deposit when they move, and some local authorities offer something similar for tenants on low incomes.

3. Reporting disrepair

Some startups are providing a streamlined way for good landlords and agents to manage repairs in their properties by facilitating communication with tenants. At the same time, local councils have new powers to tackle negligent landlords but tenants often lack the confidence to raise disrepair issues.

To work for the tenant these services should:

  • Be available for all tenants and allow them to register directly and invite their landlord. If the landlord declines to use the system, the service could at least keep a paper trail in case they need to contact their council or take legal action.
  • Prompt the tenant to contact their local council if their landlord fails to carry out repairs. It should be easy to locate the property and identify the right email address to send these requests to.
  • Record responses from the council. 
  • Collect anonymised data centrally and use it to understand problems in real time.
  • Incorporate an inventory service that would enable the tenant to take and upload photos of damage when they move in, which would give them greater control over the process - and evidence when it comes to getting their deposit back.

If it helps encourage landlords to raise standards and fix hazards, it could be funded by the state.

4. Credit score

This week MPs debated whether renters should have their rent payment history contribute to their credit score. It's a very popular idea - the subject of a petition that got more than 100,000 signatures (prompting the debate) and of a Bill in the House of Lords being championed by the Big Issue's founder, Lord Bird. You can read the debate here.

One of the three credit score companies, Experian, is already doing this, so it might not even need the government to do that much. 

We're currently surveying private renters over on Survey Monkey, and will have a clearer idea of what's needed once the results are in.

5. Savings & Investment

In case you hadn't heard, the renter population has been growing because house prices have been rising and home ownership is now unaffordable. Also, interest rates are low so if you have savings they won't make you much money.

This implosion of the capitalist dream has inspired several bright sparks to come up with schemes that give renters a taste of those rising prices. Meet the crowdfunded buy-to-let scheme. 

The idea is you put your savings into the scheme, which buys up properties. You receive a regular share of the rent and see your lump sum rise in value along with house prices. 

There are two problems with this:

  • The property market could slump - indeed, if your scheme invested in central London it already has.
  • It adds to demand for existing homes, pushing up house prices, and doing you and your fellow renters no favours.

You want to offer an investment for renters that won't fuel the housing crisis? Housing Bonds. Borrow money from the British public, build social housing, and they get a return once rents start coming in. Housing Associations already borrow money on the financial markets - all it needs is a bit of marketing to encourage people to feel like they're doing their bit for renters, and you'll actually build some new homes.

Of course, when it comes to housing supply, there's a lot more that needs to change, including the planning system and the allocation of genuinely affordable homes. But with so much money idling away in low interest ISAs, there's a real opportunity to get it to work.

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This field is constantly changing. New services and areas to be overhauled will emerge. We haven't yet determined which services are doing the right thing but these principles will act as a benchmark when we do. In the meantime, a list of some of startups are over on our Resources page. We'll be keeping a close eye on developments and sticking our oar in to make sure things go in the right direction. 

Remember to take the survey!

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  • commented 2017-11-07 17:00:53 +0000
    “tenant passports” …Not involve superfluous information..
    Deposit…replace it with an insurance premium worth a week’s rent or less.

    So, you can pay your insurance premium and proceed to totally trash your rented property.
    Then move on to the next one, safe in the knowledge that everything will be paid for by the
    insurance and no trace of this will be allowed to show up on your tenant passport. How
    convenient for you.

    Perhaps you can understand why landlords will not be very keen on these proposals.
    They will see them as the “Charter for the Tenant from Hell”.
  • commented 2017-10-31 18:59:46 +0000
    With the private rented sector doubling since 2004 and home ownership in England at a 30-year low (English Housing Survey, 2017) helping tenants on their path to homeownership is so important.

    At www.creditladder.co.uk our research shows that rent can account for up to 40% of income but counts for nothing in the eyes of lenders even though there is clear evidence that they are reliable payers. It should be a tenants right to have their biggest expense recorded on their credit file to help gain access to better rates for a more secure financial future. The recent debate in parliament is a major step forward.

    I’d be happy to speak to Generation Rent further to see how we can potentially spread our message (help@creditladder.co.uk).