Academic research suggests tenants in England and Wales are missing out on £80m of interest to tenancy deposit schemes every single year.
Figures obtained by Dlighted show that £4.2billion of private tenants money is currently sitting in three Government-backed tenancy deposit schemes – but just 2% tenants receive interest on that cash.
A new report by University College London’s Dr Mike Seiferling estimates that if these deposits accrued interest at 2.5% – the rate on Barclay’s Help to Buy ISA – renters would have an extra £82m in their pockets.
Dr Seiferling is quoted as saying
“Tenant deposits are tenants’ hard-earned money, yet the protection system appears to treat them like a cheap overdraft for the lettings industry. The system is ripe for change. This money is the closest many tenants have to savings so if it is tucked away for as long as they are renting, it should at least be earning them a decent return.”
The research also shows that of the £4billion currently held in government-accredited tenancy deposit schemes, only £57 million is required in cash at any one time – leaving a possible £3.96 billion which could be being invested – for example, in 35,000 new homes.
Ajay Jagota is Managing Director of deposit-free renting firm Dlighted. The firm allows tenants to rent for zero deposit by using low-cost deposit replacement insurance to provided their landlords and letting agents with £600,000 of protection against property damage, rent arrears and legal costs.
Ajay is also the head of the #ditchthedeposit campaign, which is calling on the government to help Britain’s renters use their deposits to save for a property of their own with Help to Buy ISAs and deposit-free renting.
Ajay responded to the report:
“We’ve been arguing for years that in the 97% of cases when deposits are unnecessary renters are still losing out because changes in the cost of living mean that the value of the deposit they handed over will be inevitably lower than the value of the deposit they are handed back. At current rates of inflation, the average deposit is decreasing in value by close to 3% a year.
“When Dr Seiferling states that deposits are the closest things many tenants have to savings, I couldn’t agree more. He’s 100% correct, that that money shouldn’t be being used by businesses to make money, it should be being used to help the people who it belongs to onto the property ladder.”