Deposits pushed towards £1500 after introduction of Tenants Fees Bill

Deposits pushed towards £1500 after introduction of Tenants Fees Bill

A government plan to cap tenancy deposits at 6 weeks rent threatens to cost Britain’s renters an average of £1391 – and the country up to £6bn.

The Draft Tenant’s Fees Bill set out government plans to cap tenancy deposits at the equivalent of six weeks rent – rather than the four weeks previously announced – and to ban letting agent fees.

The government claims that the banning of letting agents fees will save renters an average of £350 but renting reformer Ajay Jagota, from the #ditchthedeposit campaign believes renters may in future face increased up-front costs of moving home as a result of the extended deposit cap.

Ajay, founder of deposit-free renting firm Dlighted, said: “This law is supposed to address the affordability of renting, but at this rate many renters are actually going to end up worse off.

London Mayor Sadiq Khan has also claimed that “Ministers have bottled it on their commitment to reduce up-front deposits”

Estimates using average rent figures from Homelet suggest that the average tenancy deposit renters would have to find following the introduction of a six-week tenancy cap, assuming landlords and agents charged the maximum amount, would rise to:

•    A national average of £1391 (average rent £927pcm)
•    A South East average of £1595 (average rent £1001pcm)
•    A London average of £2390 (average rent £1593pcm)

A deposit cap of six weeks could also see the overall amount of cash lost to the British economy in tenancy deposit accounts rise from £4.1bn to £5.9bn.

Ajay said: “This law is supposed to address the affordability of renting, but at this rate many renters are actually going to end up worse off.

Banning letting agents fees supposedly saves renters an average of £350, but by opening the door to a universal tenancy deposit of six weeks rent the same legislation will cost them four times that. That’s hardly a better deal when they could be renting deposit free.

Many letting agents and landlords currently charge deposits of four weeks rent, but this legislation pretty much puts it in writing that they should be charging six, raising upfront costs to renters by a third. Sadiq Khan this week claimed the government had ‘bottled’ the deposit cap, and it’s hard to disagree with him.

Deposit free renting means landlords and agents renting without risk – the risk of empty properties, the risk of rocketing rent arrears and the risk of unaffordable repair costs or legal fees. It also makes it easier to actually find tenants.

The government recently announced that 98.5% of cash deposits are returned without a deposit dispute, figures which are worse than the percentage of our tenancies ending in an insurance claim, so there’s little to no evidence that taking a cash deposit improves the behaviour of tenants or the outcome at the end of tenancies either”.

Join our mailing list:

Leave a comment

Latest Comments

Scott Garnet
Scott Garnet 06 Nov 2017

If you have a patio or a porch it is important to make sure that any connecting doors are secured. Good advice for sliding glass doors is replacing the panels with storm resistant glass and getting heavier...

view article
richardrawlings 01 Nov 2017

What has not been mentioned here is the effect of not only higher interest payments, but also that these payments are less likely to be offsettable as a business cost due to the scaling back of mortgage...

view article
Kelvin Lloyd
Kelvin Lloyd 09 Oct 2017

IT is up, to the Planners. If they will only give permission for bungalows on certain (suitable) sites, they will be built.

view article
maggie swift
maggie swift 09 Oct 2017

It's just the beginning of the shocking rise.

view article
maggie swift
maggie swift 09 Oct 2017

I have recently read that the bungalows can provide social housing for elderly residents in London.

view article
zoe glover
zoe glover 05 Oct 2017

Update! Worst company I have ever dealt with. Undervalued a Cambridge property by over 100k, wont take on any evidence of valuation including a RICS valuation done 3 years ago for the very same value...

view article
Paul Edwards
Paul Edwards 27 Sep 2017

Its nonsense articles such as this that make it harder to get clients to realise just how difficult the market is out there. When you see Rightmove and there are more 'price reduced' then 'new' most days...

view article
Tom Allen
Tom Allen 20 Sep 2017

Absolutely agree with you!

view article
RyanGeo 18 Sep 2017

A sharp correction would be a less dramatic expression to use. That is already underway in certain sectors in Reading where I practice as Chartered Surveyor

view article
sean benton
sean benton 01 Sep 2017

Identity theft is a thread for any profession. So,people should stay alarmed. I once take help from a letting agent and came to know that letting agents are taking every precaution to prevent fraudulent...

view article
Mark N.
Mark N. 30 Aug 2017

We have seen a surge in instructions over August and that should continue into September too.

view article
Chris 30 Aug 2017

Unfortunately, all the legislation bears its force on Landlords and ignores, naively, the effect of Rogue Tenants on the ability of landlords to keep houses in repair and offer properties for rent at reasonable...

view article

Related stories

More articles from Landlords