More than one million UK private landlords could ultimately adopt deposit alternative products if the government proceeds with proposals to abolish insured tenancy deposit schemes, according to research by Zero Deposit.
Zero Deposit surveyed 800 UK private landlords to understand how they would respond if insured tenancy deposit schemes were withdrawn. The government has separately proposed abolishing such schemes, with Tenancy Deposit Scheme (TDS) figures indicating the changes could affect how more than 2.1 million deposits are held and managed.
Nine per cent of landlords surveyed said they would move directly to a deposit alternative if insured schemes were no longer available. Based on the government's estimate of 2.86 million private landlords, Zero Deposit calculates this equates to approximately 266,736 landlords.
Almost two-thirds (64%) said they would transfer deposits into a traditional custodial scheme. However, a further 26% said they would be guided by tenant preference when deciding how to replace insured deposits. Zero Deposit estimates this represents a potential additional 755,751 landlords who could opt for alternative products where tenants favour that route, bringing the combined total to more than one million.
When asked what would matter most in deciding how to manage tenancy deposits, a quarter (25%) of landlords identified robust protection against damage as the primary consideration.
Faster dispute resolution ranked second (17%), followed by regulatory certainty (16%), lower costs (15%) and reduced administration (15%). Tenant affordability influenced 9% of respondents, while 3% cited cash flow.
Separately, 58% of landlords said they would like the flexibility to offer tenants more than one deposit option if insured schemes were abolished, against 42% who said they would prefer a single option.
Sam Reynolds, chief executive of Zero Deposit, said, "These findings show landlords are approaching any potential changes to tenancy deposit legislation pragmatically. While many will naturally move to custodial schemes, there is also clear evidence that a significant proportion are open to alternative solutions, particularly where they offer greater flexibility for tenants.
"What's becoming increasingly clear is that landlords aren't looking for a single replacement for insured tenancy deposits. They're looking for a broader toolkit of trusted solutions that help them manage risk, navigate regulatory change and meet the needs of an increasingly diverse tenant market.
"Over recent years we've seen growing demand for products that remove barriers to renting while maintaining landlord protection. Deposit alternatives are one part of that, but we're also seeing increasing interest in solutions such as Guarantor+, which can help landlords confidently let to tenants who may not meet traditional affordability criteria.
"Whatever the outcome of the government's proposals, we believe the direction of travel is towards greater flexibility. Landlords and letting agents will increasingly want access to a range of trusted solutions that protect their investment, support good tenants and enable them to adapt as the private rented sector continues to evolve."
