Research from Zero Deposit estimates that over 1 million private landlords in the UK could adopt deposit alternatives if the government removes insured tenancy deposit schemes. The study covers 2.1 million deposits currently held under programs like the Tenancy Deposit Scheme (TDS), showing how policy changes could transform deposit management across the sector.
A poll of 800 landlords found that 9% would immediately switch to alternative deposit solutions if insured schemes ended. Applying this to the government’s estimate of 2.86 million private landlords suggests around 266,736 would make the change. However, 64% would revert to traditional custodial schemes, while 26% would follow tenant preferences—potentially adding 755,751 more landlords to the alternative market, exceeding 1 million total adopters. The survey highlights that while custodial schemes remain popular, tenant-driven choices could accelerate adoption of alternatives beyond initial expectations.
The survey also revealed landlord priorities when selecting deposit solutions. Damage protection ranked highest, with 25% of respondents naming it as essential, reflecting concerns over property maintenance costs and liability risks. Faster dispute resolution (17%), regulatory clarity (16%), lower costs (15%), and reduced administrative burden (15%) followed, indicating a preference for solutions that minimize operational friction. Only 9% emphasized tenant affordability, and just 3% focused on cash flow improvements, suggesting risk mitigation and efficiency remain dominant concerns over financial flexibility for tenants.
Landlords favor flexible deposit options
Flexibility in deposit options emerged as a key consideration. More than half (58%) of landlords said they would prefer offering multiple deposit solutions to tenants if insured schemes were abolished, while 42% favored a single standardized approach. This indicates a growing need for systems that balance risk management with tenant convenience, particularly as landlords seek to accommodate diverse tenant profiles without compromising their own protections.
Sam Reynolds, CEO of Zero Deposit, described the potential shift as a practical adjustment to regulatory changes. “Landlords are approaching any potential changes to tenancy deposit legislation pragmatically,” he said. “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.”
The findings show landlords are not seeking one replacement solution. If insured deposit schemes are removed, the market may consolidate around a combination of custodial schemes and alternative models, each designed to meet specific landlord and tenant requirements.
Regulatory clarity drives adoption of alternatives
The government continues to evaluate its proposals, but the survey suggests landlords are already positioning themselves for potential changes. Demand for non-traditional deposit solutions could rise as landlords prioritize cost efficiency, quicker dispute resolution, or greater flexibility in tenant selection, particularly in regions with high tenant turnover or diverse housing needs.
Regulatory certainty remains a top concern, with 16% of landlords citing it as a deciding factor in their deposit strategy. The shift toward alternatives may depend on how clearly new rules are defined and enforced, ensuring landlords can operate without legal uncertainty.
Zero Deposit’s research indicates that deposit alternatives could gain traction among landlords seeking simpler, more adaptable systems. The company’s Guarantor+ program, for example, has seen rising interest from landlords managing tenants with limited traditional financial records, offering an additional layer of security through third-party guarantees while reducing reliance on upfront deposits.
If the government proceeds with its plans, the deposit market may see a significant transition. Landlords who currently rely on insured schemes will need to reassess their options, potentially adopting a mix of custodial and alternative models to meet evolving demands.
For tenants, the changes could mean greater access to deposit alternatives, particularly those with non-standard affordability profiles, such as students, young professionals, or individuals with lower credit scores. Landlords, meanwhile, may benefit from reduced administrative workloads and faster dispute resolutions, depending on the solutions they choose, though the effectiveness of these improvements will vary by region and property type.
