With almost 5.8 million households expected to be living in private rented accommodation within four years as homeownership and social renting continue to fall, the amount of cash sitting in rental deposits is set to surge by around 40%, and that is despite government plans to cap tenant deposits to just one month, as announced in the Queen’s Speech, according to Ajay Jagota of deposit-free renting solution Dlighted.
With the average UK tenant currently needing to stump up £967 in tenancy deposits before being handed the keys to a new property, the tenancy deposit reform campaigner claims that the UK economy will be ‘deprived’ of around £5.8bn worth of rental deposits by 2021, reflecting predicted growth of around 24% in the number of households living in the Private Rented Sector.
Deposit reform campaigner, Jagota, described the figures as “the absolute scandal of wasting enough money to fill the funding gap in social care on literally nothing”.
The survey also shows 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 reveal that 68% of renters still expect to be living in the rental sector in three years’ time.
Jagota said: “Tenancy deposits are a blatant economic inefficiency in serious need of government intervention, an intervention which could save almost six million renters an average of £1,000 by the time of the next election.
“The £3.5bn 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 [proposed by the government] 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.
“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 Isa’s.”
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