Is it time to have another look at rental deposits?
By Alex Timperley, 13 August 2018
Security deposits are one of the most contentious aspects of the rental market. Potential tenants need to get a serious amount of money together before being able to move to a new home and this can be prohibitive for many who end up being trapped. Recent moves to rethink the whole idea and turn it into something more positive for renters are to be welcomed.
The first recent measure came towards the end of 2017 when the idea to cap security deposits at no more than four weeks’ rent was floated by the government as part of the Tenant’s Fees Bill draft. This was later amended to a maximum of six weeks’ rent, but the principle underlying it is a good one; as rents continue to grow it makes no sense not to have an upper limit. If there is no limit then landlords and letting agents will at some point be asking for infeasible amounts of money.
Make no mistake, six weeks’ rent is still a lot. However, if there is a cap then it allows people to plan for the future and save an amount they know is enough rather than having to hope they have enough. From the perspective of landlords, six weeks rent should be more than enough to make them feel secure in the tenancy.
The second new conversation regarding security deposits was kick-started this week following research from Which?, the consumer advocacy group, which stated that almost a third of renters had to pay a new deposit before receiving their old one back. Obviously this increases the financial burden on renters significantly.
Which? says this is evidence of a ‘broken’ system, further stating that 43% of renters have had to use a credit card, loan, overdraft or financial support from family and friends to cover the cost of moving into a new home. One in six tenants said the deposit from their previous home took more than four weeks to be given back after they moved out.
This does not take into account the issue of deductions from deposits, where the research highlights a lack of clarity into what deposit money can be put towards. For every landlord who makes a deduction to pay for damage to the property there is another who uses the money to pay for outstanding utilities bills, a practice which is not allowed.
All of this adds up to mean that the number of people who are struggling to get security deposits together is far higher than it should be, and Which? believes that this is enough for the government to step in. New ideas put forward include an insurance-based system for tenants or a mechanism to directly transfer deposits between landlords without the lengthy wait.
These both seem to be eminently sensible ideas and it is to be hoped that the government takes action on them in order to lighten the increasing load that tenants are being asked to shoulder in our modern renting-driven housing market.
Are you a renter looking for advice on security deposits? Get in touch with our team of experts today for more information!
A growing trend of long-term renting makes it more important than ever for landlords to be targeting the right audience
New data shows that many Brits are thinking about upping roots for a new life
Research shows that one in 10 lettings agents reject all DSS claimants - is this fair?
Renting can be expensive but many underestimate quite how expensive becoming an owner-occupier can be.
How can deposits be changed to improve the lettings sector?