Housing Minister Brandon Lewis yesterday announced Government-wide support for a new scheme for tax-free deposit loans that will become available to thousands of potential tenants.
All of Whitehall has now agreed to offer deposit loans to staff looking to take up new tenancies in the PRS, following initial action by the Department for Communities and Local Government.
The scheme works in the same way as a staff season ticket loan, with employees borrowing some of their salary in advance in order to pay for rental deposits. The loan is then repaid from salary over up to a year – the scheme is available to be taken up in both the public and private sectors and not limited to Civil Service employees.
The Department for Communities and Local Government is working with the Department for Business Innovation and Skills to increase availability across the private sector. It will help landlords access a significant pool of tenants, those joining graduate schemes for instance, and essential workers at present struggling to find accommodation as they try to match deposit requirements even though they have sufficient salary to meet the rents themselves.
Living closer to work is the ambition of many people employed in London but often the need for a high deposit is more of a deterrent than the rent itself, which could be afforded especially as it would eliminate much of the cost of commuting.
Instead of season ticket loans, which this new scheme effectively mirrors, employees will be able to rent the home of their choice, use their savings on travel costs to contribute to rents, and enjoy a better lifestyle through the diminished need for daily travel.
Generally employees are offered interest-free loans to pay their deposits when they move into a privately-rented home, paid back through their salary over the course of up to a year. The loan is conditional on the deposit being secured through a tenancy deposit protection scheme and staff pay back the loan through deductions from their monthly salary across no more than the following 12 months.
The department has worked with Civil Service employee policy colleagues to produce guidance that can be adapted by organisations looking to implement deposit loan schemes.
This is far from limited to the capital, however, and should help the PRS in other regions where both deposits and travel costs are high. Young professionals especially, who stay in an area for a year or two before moving to develop their career, will now find moving more flexible and so, too, will employees regarded as essential staff. Carter Jonas will investigate how employers can be encouraged to adopt the scheme to widen its take-up beyond the public sector.
Lisa Simon,
Partner Head of Residential Lettings
T: 020 7518 3234
