The government's plan to cap tenancy deposits at six weeks rent threatens to cost Britain’s renters an average of £1391 – and the country up to £6 billion.
The draft Tenant’s Fees Bill, published last week 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 agents' fees.
The government claims that the banning of fees will save renters an average of £350 but campaigning agent Ajay Jagota - who runs an alternative-deposit company - says renters may in future face increased up-front costs of moving home as a result of the extended deposit cap.
“This law is supposed to address the affordability of renting, but at this rate many renters are actually going to end up worse off" he says.
Jagota, using average rent figures produced by Homelet, says 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 £1,391 (average rent £927pcm);
- a South East average of £1,595 (average rent £1,001pcm);
- a London average of £2,390 (average rent £1,593pcm).
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 £4.1 billion to £5.9 billion, he says.
“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.
“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. [London Mayor] Sadiq Khan this week claimed the government had ‘bottled’ the deposit cap, and it’s hard to disagree with him."