Disrupting the rental economy is necessary to liberate gig-economy workers


The rental economy in the UK is booming. In fact, between 2007 and 2017 the number of private rental properties in the UK increased a huge 63%.

This growth isn’t slowing down, with an additional 560,000 households expected to be in private rental accommodation by 2023.

Tahir Farooqui, Founder & CEO, Canopy Rent explains that this growth is partly driven by the increased cost of buying a home. Rising house prices in the UK have outpaced salaries, with the average home (outside London) now costing  £230,292 (up from just £70,000 in 1998).

That’s almost eight times more than the average salary of £29,588 a year. Due to this large expense, first-time buyers typically spend eight years saving to buy a home, with those based in London saving for an additional two years.

As a result, renting is no longer a short-term living situation for the younger generations before they are able to buy.  Nearly half of 25 to 34-year-olds rented their home privately in 2017 and the proportion of 35 to 54-year-olds who live as private tenants has nearly doubled since 2006-07.  Not only have the demographics of renters shifted, there’s also more of them: a fifth of the UK population lives in privately rented accommodation -that’s around 4.7 million households.

The current rental landscape: fragmented and expensive

Despite the huge rental economy in the UK, the industry is still tricky to navigate for renters. In the last ten years digital transformation has impacted almost every industry and a number of technology-driven startups have sprung up in the proptech space, revolutionising everything from mortgages to property management. Buyers, landlords and estate agents have streamlined processes however, renters are yet to be provided with the same level of service.

In particular, renting is still extremely expensive. Especially for gig-economy workers, young renters and those from disadvantaged backgrounds. Unfortunately, the irregular income associated with part-time/frequently changing shift work means something as necessary as renting a home can become a challenge.

On average, UK tenants already spend 35% of their salary on rent, rising to 65% for renters in London. As well as this, the average deposit in England is currently valued at £1,110 and, given the average wage in the UK is £29,588, an average renter based in England is expected to put down a deposit that is over half of their monthly income. Without a consistent ‘pay-day’, gig-economy renters are often classified as ‘high-risk’ and, as a result, asked to pay a bigger sum of money up front or seek a guarantor.

This is ridiculous, as the gig-economy is booming and accounts for 4.7 million British workers. The rental sector should take inspiration from the flexibility and  instant gratification that has been made the norm by the gig economy. Using today’s technology and powered by open banking, it’s possible to create a rental system that is financially beneficial for both renters and landlords, because, when it comes down to it, tenants and landlords have a lot in common – they all want financial security.

Deposit free renting to become the rule not the exception

Liberating gig-economy workers, young renters and those from disadvantaged backgrounds who cannot afford the over-the-top fees can be done ditching the deposit.

Rental affordability remains the number one priority for tenants when choosing a property. However, at the moment, renters are expected to pay a deposit over five weeks rent before they are eligible to move into the property.

For a renter based in England’s capital city, this amounts to more than  £3,000, putting them under what can be a huge financial pressure. A recent poll found 40% of working age Britons have less than £100 in savings, with the proportion increasing to more than  50% in specific regional locations. Thus, many renters can be living paycheck to paycheck and a deposit of this size this can be prohibitively expensive. In worst case scenarios, renters can become trapped in unsuitable and substandard accommodation.

By offering renters the option of deposit protection insurance, the landlord is still covered for any damage or loss of rent (for a higher value than is covered by the traditional deposit) without the need for the renter to pay out a large lump sum at the beginning of their tenancy. This can enable renters to save some money – whether that is for a house deposit or just in case of a rainy day.

Open banking

One way the property industry can further streamline the process for renters is to harness disruptive technology available. In particular, open banking can have a hugely positive impact on the rental industry.

It’s a service that provides third-party financial service providers open access to consumer banking, transaction, and other financial data from banks and non-bank financial institutions. When considering how it works, it’s vital to realise open banking is not limited to financial services.

For the property sector, open banking brings with it the opportunity to re-set the precedent of incoherence that has been established by traditional processes. Currently landlords have to request and wait for paperwork such as bank statements, references and proof of previous addresses to be collated and sent by the renter. The validity of these documents must then be checked, which can mean renters wait weeks before they are allowed to move into a property.

This changes with open banking. Through this innovative technology it is now possible to automatically verify a renter’s income and past rental payments using their transactional history. And because data should belong to the person it concerns, renters can then access this on-demand and share it with different letting agents and landlords, should they want to.

Not only does this speed up the process enabling landlords to make informed and fast decisions regarding a tenancy, it ultimately streamlines the rental  process for all parties involved.

Other technologies can also help build financial resilience for renters. For example, rent tracking technology that records monthly rental payments and allows them to build up a credit history, ultimately improving their credit rating during the course of their tenancy.

A strong credit score translates into higher savings for renters, with lower financing rates and better access to a range of financial products.

Ultimately every human being has the right to a safe roof over their head and the opportunity to build a better life. At the moment, the rental landscape does not cater to renters in the same way it does for landlords. However, thanks to innovative technology this is changing and the future of deposit-free renting is closer than it seems.