It is estimated that £4.5bn of cash is currently tied up in rental deposits, providing landlords with a degree of security and peace of mind, amid the coronavirus crisis.
Various reports suggest that a growing number of tenants are now struggling to pay rent due to the impact of the Covid-19 outbreak, after having their wages cut.
Despite the government’s Coronavirus Jobs Retention Scheme, many employers are asking staff to reduce their hours, take a pay cut or to be furloughed, and this is having an adverse impact on those required to pay rent.
Polling conducted by Opinium, on behalf of the Guardian, showed many renters are currently either already in or on the brink of a financial crisis, with one in six forced to seek extra financial help to stay afloat.
The survey found that six in 10 renters had suffered financially as a result of the UK-wide shutdown.
Buy-to-let landlords generally recognise the importance of taking a deposit from a tenant and placing it in a government-backed tenancy deposit scheme as protection to ensure that any potential damage or unpaid rent at the end of the tenancy is covered.
But Canopy, a FinTech start-up, believes that many landlords and tenants would be better off if more renters were to replace their cash deposits with its deposit replacement insurance policy, which provides added protection for life events, such as critical illness or job loss.
As opposed to a renter being required to pay a full five weeks rental as a cash deposit, Canopy’s premium costs 10% of the amount covered (i.e 10% of eight weeks rent) for a 12-month tenancy agreement, 15% for a 24-month tenancy and 20% for a 36-month tenancy.
Canopy’s cover also offers an extra three weeks of protection to landlords i.e. eight weeks cover as opposed to the standard five weeks with a cash deposit.
Tahir Farooqui, founder and CEO of Canopy, commented: “Due to the profound impact COVID-19 is having on the lives and livelihood of renters, we feel that now is a crucial time for all in the market to shift from a mindset of ‘selling’ to one of ‘supporting’ lettings agents, landlords and tenants to the best of our abilities.”