Banning Rent in Advance: Why it could backfire on those in need

The Renters’ Rights Bill has sparked significant debate, and one particular amendment—banning landlords from requesting more than one month’s rent in advance—has raised serious concerns. While the government’s intentions to ease cost of living pressures are understandable, the unintended consequences of this policy could disproportionately harm the very people it seeks to protect.

Limiting upfront rent to a single month may seem fair and straightforward on the surface. After all, tenants shouldn’t routinely be asked to pay multiple months of rent in advance. However, there are situations where this option provides a lifeline for those on the financial margins—tenants with poor credit, international students, self-employed individuals, and others who struggle to meet standard referencing criteria.

Why Paying in Advance Matters

Being a landlord is, in essence, a business, and letting property comes with inherent risks. When assessing prospective tenants, landlords typically evaluate their ability to meet rent payments reliably. For tenants with steady income, a solid credit history, and positive references, this process is usually straightforward. But for others, the picture isn’t so simple.

Our referencing data highlights a crucial issue with the proposed ban on rent in advance. As shown in the chart, while the majority of applicants pass referencing (green), a notable portion require a conditional pass (orange) or fail outright (red). January & February 2024 saw a sharp spike in applications, mostly as this is when our student lets are being processed, with a significant number of conditional passes—many of whom likely relied on rent in advance to secure a tenancy. From this graph above, all sections highlights in orange could potentially be affected by this change in the law.

Consider tenants who fall into the following categories:

• International students or workers: Often without a UK-based guarantor, they rely on upfront rent payments to secure housing.
• Self-employed individuals: New business owners or freelancers with fluctuating income may not meet the rigid referencing requirements.
• Those with poor credit history or no financial track record: These tenants are often seen as higher risk, even if their current circumstances have improved.

Paying rent in advance is sometimes the only way for these groups to demonstrate their ability to meet obligations and compete in a competitive rental market.

Real-Life Scenarios

This month alone, we’ve encountered two situations that illustrate how this ban could inadvertently exclude vulnerable tenants:

1. A couple moving in together: One of the prospective tenants had recently started her own business and didn’t have the required one year of accounts to verify her income. Without a guarantor and facing a conditional pass under standard referencing, her only option was to pay in advance, or provided a UK based guarantor (which was not a personal option for her). She was fortunate enough to pay in advance, allowing her and her partner to take the next step in their lives. Under the proposed amendment, this wouldn’t have been possible.
2. An overseas student: Without a UK-based guarantor, this student relied on paying rent in advance to secure accommodation. If this option were removed, their access to housing, and potentially the education they've come for, would have been severely restricted.

For tenants in such situations, applying to private guarantor companies might be an alternative, but this comes at a cost—fees that aren’t refundable and can run into hundreds of pounds. It raises uncomfortable questions about whether such companies stand to benefit from this legislation.

Unintended Consequences

The government’s amendment shifts more risk onto landlords, who are already navigating a market where demand far outstrips supply. Faced with greater uncertainty, landlords will naturally gravitate towards tenants with more predictable financial circumstances. This, in turn, will disadvantage those who are already struggling to secure housing, exacerbating inequality in the rental market - creating the very thing the law hoping to stop.

Critics often accuse landlords of being solely profit-driven, but this oversimplifies the challenges of managing a rental property. Many landlords are private individuals, not large corporations, and their concerns about risk are legitimate.

What Needs to Change?

Instead of an outright ban on rent in advance, the government should consider more nuanced solutions that protect tenants while preserving their ability to access housing. For instance:

• Creating a regulated framework for upfront rent payments, allowing them in exceptional circumstances with clear guidelines.
• Expanding access to low-cost guarantor schemes or introducing government-backed initiatives to support those who can’t meet referencing criteria.
• Promoting dialogue between landlords, tenants, and policymakers to strike a balance that addresses the needs of all parties.

Final Thoughts

The Renters’ Rights Bill may be well-intentioned, but the amendment to ban rent in advance risks backfiring on the very tenants it aims to protect. Without careful reconsideration, it could shut the door on housing for those most in need of flexibility—international students, the self-employed, and those rebuilding after financial difficulties.

Housing policy must balance protecting tenants and enabling access to homes. Let’s not let short-sighted reforms make the rental market even harder to navigate for society’s most vulnerable.