What tenant referencing trends could affect your agency in 2022?

The cost of living is increasing, as is the importance of choosing the right tenant for your landlords as everyone sees a squeeze on their budgets. Many of these real world factors are having an impact on affordability in tenant referencing - with new trends emerging, that we've seen at Vouch, to counteract the issue.

More tenant negotiations on rent

Tenants are starting to miss out on properties that they could previously have afforded, as they have to stick more rigidly to their budgets. With rents increasing - something that's been happening for a while - you get a lot of tenants who think, I can't quite afford what's being suggested. So they start to enter into negotiations to drop the price by 10% - or they get in touch to sell themselves to the agent and share why they're a safe bet, before any meaningful negotiations take place as well.

Flexibility in affordability

Before the cost of living crisis really kicked off, furlough had a big impact on how agents perceived affordability. Some applicants had only 80 percent of their income that they could prove, rather than 100 percent. Those fine margins can impact a reference. Agents always want to know if they've got a good solid tenant - but furlough created a grey area, pushing agents to be more flexible in the tenants that they'd accept. I think this flexible mindset towards referencing will need to continue into the future, especially with inflation increasing rents and playing havoc with affordability ratios, which are starting to favour wealthier tenants.

An uptick in guarantor requests

That's not to say that agents are being overly flexible and leaving it all to chance. Goodlord recently found that more landlords and agents are asking for guarantors - up 36% in the past 4 years - and that's something that we've seen at Vouch too. In fact, a healthy number of letting agents passing through our platform normally ask for a guarantor because it's good practice. It can add credibility and a layer of protection for their landlords; if the tenant falls short on rent, they've got someone else in play to help out.

Multiple income sources may gain prominence

Agents should give tenants ample opportunity to demonstrate their main source of income but also see what else they can bring to the party as well. There are a lot of tenants out there who picked up second part-time jobs to supplement what they earn or they have savings. Even with guarantors, a lot are retired and their savings should be taken into consideration, especially for large sums. Some agents won't accept them, whereas others will think, I'll have that all day long. Your tenants should understand that these are legitimate ways to meet their affordability quota.

A move towards digital

There's also still a healthy portion of the lettings industry that are very much stuck in their ways and haven't yet embraced digital solutions. But there are more and more property industry professionals out there who look at what they're doing and think that things are tight cost wise at the moment - so what can we save on, and how can we make our life easier as well? There are many steps in the lettings process that can be digitised - and, within each step, new ways that providers are improving the digital journey even more, like open banking in referencing. This trend has been gaining momentum for a while, and I don't see that changing in 2022.