Zero-deposit renting: new Kiko app could save tenants thousands of pounds when moving house
Proptech start-up Kiko has secured around £486,000 of funding in a bid to revolutionise the rental process, including enabling tenants to rent securely without a deposit thanks to finance checks.
The UK Tenant Act 2019 capped deposits at five weeks’ rent, meaning the average London tenant still needs to stump up more than £1,600 every time they move, on top of a month’s rent in advance.
Tenants usually have to pay the deposit before their previous one has been returned and the burden of finding such a large sum of money before every move has played a part in pushing some renters into debt.
“Last year, UK tenants forked out £5.3 billion in security deposits. This may not be a problem if the bank of mum and dad can help you out, but for most young professionals, they don’t have this luxury.
“We should be making it easier for young professionals to live and work in the city, and that is exactly what Kiko is going to do”, said Valentin Scholz, founder and chief executive of Kiko.
To sidestep the need for a deposit, the app will use open banking technology to reference-check potential tenants. It will confirm whether the applicant has a regular income or enough savings to cover the rent, also checking, among other things, that their tenant history is good.
"We prefer to look at the affordability of a tenant rather than just on the income-to-rent ratio. Open banking allows us to get a better picture of a tenants financial situation and therefore factor in savings and financial stability to allow tenants to rent properties they wouldn’t be able to with traditional letting agents. However, a minimum income-to-rent ratio of 2.5 is a good rule of thumb," said a spokesman.
Kiko’s founders – two former employees of Revolut, the banking app shaking up the personal finance industry – say their new venture differs from other no-deposit platforms because they don’t charge membership or subscription fees instead of a deposit.
After an offer gets accepted by the landlord Kiko charges a holding deposit of £250 from the lead tenant. This holding deposit will be refunded once the tenant pays their first month's rent.
Landlords will also be able to list properties for free and receive guaranteed rent on time, all via the app. Kiko will also offer a property management service for viewings, paperwork, maintenance and renewals and will take photographs, videos, floor plans and 360-degree walk-throughs. They will be charged a six per cent fee if they accept an offer from a tenant.
Tenants will be able to report issues and requests for repairs through the app and could even access add-ons, including help with moving and cleaning services.
Kiko will launch to the public this summer. The company is initially starting out in London, following with a gradual roll-out to other UK cities including Manchester, Birmingham, Glasgow and Edinburgh.
Another option for renters looking to pay lower security deposits is the Zero Deposit Guarantee, which requires tenants to pay one week’s rent and offers landlords six weeks’ security — one week longer than the traditional deposit. Under the scheme tenants do not receive their initial payment back at the end of a tenancy and will have to cover any damages or unpaid rent when they move out.