A growing number of tenants could be forced to rely on rent guarantors following the introduction of the Renters’ Rights Act (RRA), according to new research from Zero Deposit.
The analysis suggests that almost one in five local authority areas in England already fail standard rental affordability tests, meaning the average tenant is likely to require a guarantor to secure a tenancy.
That figure could rise to almost half of all local authority districts if landlords tighten affordability criteria in response to the new legislation.
Zero Deposit examined average rents and earnings across England using the common affordability benchmark that tenants should earn at least 2.5 times their annual rent. With average rents now standing at £1,438 per month, tenants typically need an annual income of £43,140 to pass affordability checks. However, average earnings across England are currently £41,859, leaving the average renter £1,281 short.
AFFORDABILITY PRESSURES
Across England’s 288 local authority districts, 19.8% currently fall below the affordability threshold. London accounts for 22 of these areas, with a further 21 located in the South East.
The company believes the introduction of the Renters’ Rights Act is likely to increase pressure on affordability assessments. The legislation restricts landlords’ ability to request larger upfront rent payments, a method often used to offset the perceived risk of tenants who failed standard affordability checks.
According to the English Housing Survey, 21.5% of private renters previously paid more than one month’s rent in advance. With that option no longer available, some landlords may respond by increasing affordability requirements from 2.5 times income to three times income.
If this became the industry norm, Zero Deposit estimates that 47.6% of local authority districts would fail affordability tests, with average earnings falling short in 137 areas.
FINANCIAL RISK
Sam Reynolds (main picture), Chief Executive Officer of Zero Deposit, says: “While the Renters’ Rights Act is designed to improve security for tenants, it also significantly changes the way landlords manage financial risk within the private rental sector.
“With restrictions on upfront rent payments and fewer traditional safeguards available, landlords and agents naturally place greater emphasis on affordability checks and income protection when assessing prospective tenants.
“As a result, we expect guarantors to become an increasingly common requirement for renters who fall outside standard affordability criteria, particularly younger tenants, overseas applicants, self-employed workers, and those moving to high-cost rental areas.
“The challenge is that the traditional guarantor model is no longer practical for many renters.
“Not every tenant has access to a suitable guarantor, and even when one is available, the referencing and verification process can introduce delays at a point where rental properties move extremely quickly.”
MANAGE RENTAL RISK
He adds: “This is why we’re seeing growing demand for regulated alternatives such as Guarantor+.
“By combining regulated protection, instant decisions and fair value, Guarantor+ helps landlords and agents manage rental risk with greater confidence, while helping tenants to secure homes faster and with fewer unnecessary barriers.
“In the few months since launch, 24% of letting agent properties are available with this product.
“In a market increasingly shaped by speed, compliance, and risk management, solutions like Guarantor+ keep tenancies moving, creating a more efficient, accessible, and dependable rental market for all.”
