Tenants in England could be owed a refund due to the new deposit cap introduced earlier this year.
An analysis from Generation Rent estimates an average of £117.90 will be sent as one-off payments to those who have been affected.
On top of this, new findings, based on Freedom of Information data, include:
- The average tenancy deposit is worth £1,107.90
- 3.98m tenants’ deposits are protected by the three approved schemes
- Tenants’ deposits are worth £4.41bn
Tenancy deposits are now capped at 5 weeks’ rent. This means that when tenants sign a new fixed-term contract on their existing home, their landlord must hand back anything above 5 weeks’ rent.
The average (mean) monthly rent in England in March 2019 was £858, according to the Valuation Office. The new maximum permitted tenancy deposit on this would be £990.
But, according to data obtained by Generation Rent under the Freedom of Information Act, the average (mean) deposit protected by the three approved protection schemes is £1,107.90 – a difference with the 5-week average of £117.90.
A government call for evidence on tenancy deposits closes on Thursday 5th September. Generation Rent is calling on ministers to enable renters to access some of their deposit to put down on a new home once the final month’s rent is paid.
Just making two thirds of the deposit available for passporting (setting the rest aside for any damage claims) would have a bigger impact on tenants’ cash flow when moving home than the fees ban.
The Freedom of Information request to the Ministry of Housing, Communities and Local Government also revealed that the three schemes – Tenancy Deposit Scheme, Deposit Protection Scheme and MyDeposits – were protecting 3.98m tenancy deposits worth £4.41bn between them on 31 March 2019.
Generation Rent argues that with deposits being passported between tenancies, the cash would not need to physically leave the protection schemes, so could be held in long term, interest-bearing accounts.
Given the potential refunds owed to tenants, the value of deposits would shrink to £3.94bn, but an interest rate of 2% would still return £78.8m, which could benefit tenants further.
Dan Wilson Craw, Director of Generation Rent, comments: “While fees on new tenancies have been illegal since 1st June, tenants who stay put could also stand to benefit, so it’s worth checking how much deposit you paid originally and if you are owed any of it back.
“The Tenant Fees Act is already putting cash back into tenants’ pockets, but we could slash the upfront costs of moving home further still, by letting tenants passport their money between tenancies.
“By making it easier to move out, the government would also give tenants more negotiating power with their landlord over rents and repairs.”