New research by Zero Deposit suggests that more than one million UK private landlords could ultimately make use of deposit alternative products if the government proceeds with proposed plans to abolish insured tenancy deposit schemes, highlighting growing demand for flexible tenancy solutions as the sector prepares for significant regulatory change.
The UK government has recently proposed abolishing insured tenancy deposit schemes, with TDS figures showing the changes could affect how more than 2.1 million tenancy deposits are held and managed.
In response, Zero Deposit surveyed 800 UK private landlords* to understand how they would adapt if insured tenancy deposit schemes were withdrawn. The findings provide an early indication of how landlords are preparing for potential reforms and the types of tenancy solutions they expect to rely on in the future.
The research found that 9% of landlords would move directly to a deposit alternative product, such as Zero Deposit, if insured tenancy deposit schemes were no longer available. Based on the UK Government’s estimate of 2.86 million private landlords, this equates to approximately 266,736 landlords.*
While almost two-thirds (64%) of landlords said they would transfer tenancy deposits into a traditional custodial tenancy deposit scheme, the research highlights a significant opportunity for deposit alternatives.
In addition to the 9% who said they would actively switch to an alternative deposit product, a further 26% said they would be guided by tenant preference when deciding how to replace insured tenancy deposits. This represents a further potential 755,751 landlords who may choose to offer deposit alternatives where tenants favour that option.
Combined, this suggests that more than one million landlords could ultimately make use of deposit alternative products should insured tenancy deposit schemes be withdrawn.
The findings also point to a broader shift in landlord priorities. As the private rented sector continues to evolve, landlords are increasingly looking beyond individual products and towards a wider range of solutions that help them balance tenant affordability, risk management and regulatory compliance.
The research reveals that landlords remain focused on practical outcomes and protections when deciding how tenancy deposits should be managed.
A quarter (25%) said the most important consideration would be securing robust protection against damage. Faster dispute resolution (17%) and regulatory certainty (16%) follow closely behind, while lower costs (15%) and reduced administration (15%) are also important considerations. Tenant affordability influences 9% of landlords, while 3% identify cashflow as a deciding factor.
The findings suggest landlords are looking for solutions that balance strong protection with operational simplicity while also recognising the importance of giving tenants greater choice. As affordability pressures continue across the rental market, many landlords are also considering complementary solutions that help them confidently let to a broader range of tenants, rather than relying on a single approach to managing risk.
This is reinforced by a separate survey question, where 58% of landlords said they would like the flexibility to offer tenants more than one deposit option if insured tenancy deposit schemes were abolished. Just 42% said they would prefer to offer only a single option.
Sam Reynolds, CEO 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.
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