One in four renters struggle to retrieve full deposit after tenancy

£5.4bn of private renters’ cash is held in Britain’s tenancy deposit protection (TDP) schemes,  but new Generation Rent research suggests that one in four renters struggles to get their money back at the end of a tenancy, with financial pressures, landlord non-compliance and unclear rules undermining the protections they should enjoy.

An online survey of 1,375 Generation Rent supporters, including nearly 1,000 private tenants, indicated that after 18 years of the protection schemes’ existence in England, there are still high levels of non-compliance by landlords and letting agents, and renters have mixed success in claiming deposits back.

While more than half (56%) of renters who had paid the full deposit for their previous tenancy received it all back, almost a quarter of tenants (23%) experienced deposit deductions they did not think were reasonable. Of these, only one in five renters used the deposit scheme’s dispute resolution service.

Common reasons for not disputing deposit deductions included:
• not being aware of one’s rights (18%)
• a fear that it would take too long (13%)
• not thinking they had enough evidence (11%)
More worryingly still, 18% of respondents could not dispute their claims because their landlord  had broken the law by not protecting their deposit.

As part of the re-procurement process of these schemes, the government is currently reviewing  the operation of the TDP system and identifying areas for improvement. Generation Rent has investigated tenancy deposit policies in other countries to identify potential solutions to build greater trust and better outcomes in the British deposit system.

These include:
• New Zealand and parts of Australia have introduced passporting of deposits between tenancies, to minimise financial stress when moving.
• Most Australian states invest the deposit funds and use the proceeds to fund support for low-income tenants and, in New South Wales, advocacy services. British Columbia imposes strict timescales on landlords to return the deposit, with the amount due sometimes doubled if the deadline is missed.

The survey also found that, to cover costs at the beginning of their current tenancy:
• one in four renters (25%) had to borrow money from friends and family
• 14% had used credit cards or loans
• nearly one third (32%) had to use their savings
• only 29% of tenants were in a position to cover these costs from their current account.

Data obtained through Freedom of Information requests reveals that the average deposit is worth £1,118 in England and Wales and £793 in Scotland, figures that have increased along with rents over recent years. Only around half of tenants are entitled to the interest on their deposits, depending on how the landlord chooses to protect it, at rates of just 0.79% at a time when the Bank of England Rate is higher than 4%.

In focus groups, renters spoke about deposits preventing them from moving home. One tenant described needing to move for their partner’s mental health, but not being able to:

“We really needed to move, but we couldn't because the deposit was the big sticking point. You can kind of sort of fiddle about with some other costs ... but having to have that deposit up front as well as the next month in advance, it was just too much.”

Many focus group participants also said that they had experienced unreasonably high deductions at the end of a tenancy for cleaning fees. One tenant said:

“I think [the landlord] was trying to make me fed up so that I would eventually just say, you know,  just keep it. But I just kept digging my heels in and I got it back eventually. But it took about four months.”

For renters who did use the dispute resolution mechanism, the deposit schemes appear to serve them well. Of the 35 tenants in our survey who had disputed their landlord's claims on the deposit through a deposit protection scheme at the end of their previous tenancy, over half had received more money back than their landlord initially proposed and just three came away with less money than the landlord had proposed. But only 15 received the undisputed portion of the deposit while the dispute process took place, potentially causing financial strain among those whose whole deposit was withheld until the scheme made its decision.

Disputing deposit deductions in a deposit protection scheme has been effective for most of these tenants, but also time consuming. Some tenants said that the stress of the process would put them off disputing deductions in the future.

Evidence from the focus groups also highlights how opaque processes open the system up to discrimination. Explaining that they had faced higher deductions for ‘wear and tear’, one disabled tenant said:

“I just know that's going to be an issue and I've kind of accepted that's one of these disability tax things that you end up having to pay extra for, but it's still not fair.”

Responding to the findings, Ben Twomey, Chief Executive of Generation Rent, said:

“While the tenancy deposit system is one of the longest-standing protections for renters, too many of us are still getting a raw deal. Despite the schemes offering to adjudicate disputes, many tenants are discouraged by the threat of delays, mystifying rules around what counts as wear and tear, and landlord dirty tricks.
“This leaves many tenants with less money every time we move, with a large share having to borrow or dip into savings to put a roof over their head.
“Another injustice is the value of our own money draining away because of such a limited return. The potential interest on the £5bn held as deposits is currently being squandered, when it could be doing so much to enforce rights and help low-income tenants find homes.
“As the government reviews the deposit system for England and Wales, ministers have an opportunity to look to other countries for policies that overcome the hurdles tenants face in exercising our rights and make the most of tenants’ locked-up wealth.”

Vivienne Jackson, Programme Manager at abrdn Financial Fairness Trust said:

“It’s clear that a deposit protection scheme is valued by people who rent in the private sector. But it now needs to do better, to make sure renters can get the best out of deposits. The UK can look to examples abroad, like Australia or New Zealand, which create more certainty and security for both renters and landlords.”

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