Rental deposits to soar by 40% despite government caps

The amount of cash sitting in rental deposits is set to soar by 40% over the next five years – despite government plans to cap deposits announced in last week’s Queen’s Speech, according to data from deposit-free renting solution, Dlighted.

Related topics:  Finance
Rozi Jones
29th June 2017
tenancy

Research by YouGov predicts that number of households living in the Private Rented Sector will grow by 24% by 2021, creating a total of 5.9m privately renting households who in total will pay at least £5.8billion in tenancy deposits.

With the average tenant currently paying £967 in tenancy deposits, the extra 24% privately renting will add an extra £2.3bn to the £3.5bn currently held in the bank accounts of landlords and letting agents and in tenancy protection schemes.

Dlighted founder Ajay Jagota says Government plans to cap tenancy deposits at the value of one month’s rent – unveiled last week – "will have no impact upon the figures".

The survey also show that 37% of tenants now rent out of choice rather than necessity – with renters naming the flexibility and fewer responsibilities of renting as principle reasons for them not purchasing properties of their own.

The figures, commissioned by property firm Knight Frank, also show that 68% of renters still expect to be living in the rental sector in three years’ time.

The Department of Communities and Local government’s most recent Housing Survey revealed that the Private Rented Sector has doubled in size since 2004, while homeownership has also fallen to its lowest rate since 1985.

Ajay Jagota founder of deposit-free renting solution Dlighted, said: “Tenancy deposits are a blatant economic inefficiency in serious need of government intervention, an intervention which could save 6 million renters an average of £1,000 by the time of the next election.

“The £3.5billion already is an eye-watering figure enough, but the £5.8bn it could rise to within five years is monstrous. With 97% of deposits unnecessary this is an absolute scandal.

“I’m not convinced a deposit cap goes anywhere far enough, but I believe the industry has to accept that this is just the first step. I predicted pre-election that tenancy deposit reform is now irrevocably on the agenda and even just this week deposit-free renting was proposed in an influential blog by leading property academic Professor Brian Sturgess, you can read it here.

“The tide is turning in favour of deposit-free renting, and those of us who have worked so hard to put reform on the agenda – even when it has not been a very popular attitude in our industry – are entitled to feel a little vindicated.  

“There are an infinite number of better ways all that money could be spent, and by abolishing out-dated tenancy deposit schemes with deposit-free renting and landlord insurance we can save renters a fortune while giving landlords better protection and boosting our economy or facilitating generation rent onto the housing ladder via transfer of funds into Help To Buy ISAs.”

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