Is it time to say goodbye to rental security deposits?
European renters have over €70 billion locked in security cash deposits – a significant amount of capital that could be put to better use in today’s challenging times. Europe is in the midst of a student housing crisis, with students across the continent struggling to find a place to call home during their studies. Many student hot spots are struggling to keep up with the rising demand for accommodation, and in some countries, a lack of housing is preventing students from starting their studies altogether. Last year, several Dutch universities had to warn international students not to come to the Netherlands if they didn’t find somewhere to live before mid-August.
Those who do manage to find a home have to contend with big financial expenses and a widespread cost-of-living crisis. Rising costs combined with restricted working hours and low incomes threaten to push some students into financial stress. In Germany, for example, nearly 40% of students were at risk of poverty in 2021 according to German Federal Statistical Office. And that was two years ago. With the EU inflation rate at 9.2% in 2022, it’s likely that number will only continue to grow.
The rise of deposit-free renting
So, how can landlords help reduce the financial burden placed on students and continue to protect their portfolio? Deposit-free renting is one alternative to put more money back into the pockets of students. Often set at three months’ rent – or even up to six months in some countries – security deposits are a huge upfront cost for students to cover on top of monthly rent payments, food, study materials, transport, and everything else in between. They are an inefficient use of capital and add to an ever-growing pile of paperwork for both landlords and students.
The alternative? Deposit insurance. Instead of paying a large cash deposit, tenants pay a small monthly fee to protect against missed rent or damages. With policies starting as little as €3.00/month, Garentii deposit insurance provides flexibility, makes renting more affordable for students and offers full deposit coverage and peace of mind for landlords. Students avoid one major expense as they settle into their new place and landlords avoid the hassle and paperwork of managing cash deposits. The best part? It takes only a few seconds to set up online. Everyone wins.
A better way to rent, for landlords and tenants
Moving away from large lump-sum security deposits can widen the rental market for students, freeing up more money to go towards rent and applying for more places, or to pay for groceries or unexpected expenses. Deposit insurance also alleviates any fears students have about not getting their deposit back when they move out. It’s particularly beneficial for international students, who are often stuck in an impossible “chicken or egg” scenario of not being able to open a bank account without a local address or pay a security deposit without a local bank account.
On the landlord side of things, deposit insurance helps cut out a lot of the admin that comes with managing security deposits – multiple bank accounts, paperwork, tax audits, tedious transfers during portfolio sales, the list goes on. With Garentii, landlords can manage all deposit policies on one central platform, for faster conversions and an overall boost to NOI. If they do decide to sell their portfolio, they no longer need to spend time tracking down each security deposit, which can slow transaction times significantly.
Ultimately, Garentii aims to make housing more accessible and renting much easier, for everyone involved. Landlords and operators like Yugo, Home&co, Basecamp, Poha House and many others work with Garentii to offer their tenants more flexibility.
A concrete social impact
Returning millions of euros back into the pockets of students could create real social impact and make financial wellness a little more attainable and inclusive for the next generation. As the PBSA industry grows and puts higher priority on ESG, we will see more initiatives and solutions to encourage affordability, flexibility and, ultimately, a more sustainable rental experience.