Whilst it has been widely reported that young people cannot afford to buy property in the UK because of the high prices, it now looks as though many cannot afford to rent either. About 700,000 people aged between 18 and 34-years-old cannot even set foot on the rental ladder, research from credit report provider Noddle shows. This is for a variety of reasons including finding a deposit and rising rents, particularly in popular areas where demand continues to outstrip supply. Other challenges they are facing include the fact that some landlords are reluctant to take on young tenants and that they have poor credit histories, simply because they have not borrowed money or built up a credit history.
The research also shows that many tenants need to save up for four months to get the deposit together and then still need to have a guarantor to secure a property. It is little wonder that they are finding it difficult to get on the rental ladder with average rental deposits in the UK being about £970 and average monthly rent payments at £927. The situation is worse in London, where many young people will wish to locate for work or university. In the Capital, the average deposit is £1,831 with an average monthly rent of £1,593. Because they may be seen as a higher risk because of the lack of credit history, London landlords are, again, wary of taking them on. When you consider that, on average, there are almost four people applying for every rental property, landlords can afford to pick and choose.
Young people are being advised to try to get household bills or credit cards put in their name rather than rely upon their parents. This way, they can show the potential landlord that they are creditworthy. Clearly, these bills will need to be paid on time, otherwise this will have a negative impact on creditworthiness. Being on the electoral roll will also help prospective tenants provide proof of address.
For younger tenants, the biggest problem will be finding enough money for a deposit and the first month’s rent. Even if they are already in rented accommodation, the problem can worsen when they want to move. The chances are that they will have to find funds for a deposit for their new home before the previous deposit is returned to them.
One answer could be to do away with the deposit scheme. Landlords and letting agents can sign up for a deposit replacement insurance scheme, such as Reposit, which indemnifies the risk if a tenant damages a property or does not pay the bills. With about £3.6 billion estimated to be held in UK deposit protection schemes, ditching the deposit would also boost the economy by freeing up this money. Some deposit replacement insurance schemes are paid for by the landlord or letting agent who can then make a claim on the insurance, if necessary. If the claim is successful, the tenant then becomes liable. Similar insurance policies are paid for by the tenant and are equivalent to about one week’s rent, making them far more affordable than traditional deposit schemes.
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