The deposit paid by tenants in the private rented sector as a security is to be reduced from six weeks to five weeks for tenancies rented out for under £50,000 a year, it has been announced.
Secretary of State for Housing, James Brokenshire, said that the change will save private sector tenants hundreds of pounds when they enter a new tenancy. Six weeks’ rent will continue to apply where the annual rent is £50,000 or more.
The change was announced as an amendment to the Tenant Fees Bill which sets out the Government’s plans for banning letting fees in England.
It is estimated that around one in three tenants who currently pay a deposit are set to benefit from the change and overall it will save them £64 million in the first 12 months while also making sure landlords are able to recover costs in the event of damage to their property.
‘These amendments will make renting a home of your own more affordable, fairer and more transparent, enabling tenants to keep more of their cash and stopping unexpected costs.
Everyone deserves a home to call their own,’ said Brokenshire.
‘Yet for some renters, moving to a new house can be difficult due to high upfront costs and letting fees. This is unacceptable. I want to see a housing market that truly works for everyone, and one which provides a better deal for renters,’ he added.
Other amendments to the Bill include protecting tenants from unfair fees by limiting the type of default fees that can be charged by landlords and property agents.
This change means that during the tenancy landlords and agents will only be able to charge fees to replace lost keys or for late rent. Landlords will still be able to claim back costs for damage through the tenancy deposit at the end of the tenancy.
However, landlords and agents will not be able to write lots of different default fees into a tenancy contract and tenants cannot be charged hundreds of pounds for a damaged item that actually only costs a few pounds to replace.
It builds upon comprehensive measures taken by ministers to increase protection for tenants and drive up standards in the private rental sector, including scrapping letting fees charged by both landlords and letting agents, which can cause a significant affordability problem for tenants and are often not clearly explained.
It also includes capping holding deposits at no more than one weeks’ rent and ensuring landlords and agents return holding deposits to tenants within 14 days and capping the amount that can be charged for a change to a tenancy at £50 unless the landlord can demonstrate that greater costs were incurred.
However, the lettings industry does not think it will have much impact and could be seen as unfair to landlords. ‘Politicians are attacking the industry for their own purposes. Tenancy deposits have worked perfectly well for over a decade, and there is no basis in research that these amendments are necessary,’ said David Cox, chief executive of the Association of Residential Letting Agents (ARLA).
‘This move will do nothing but push the most vulnerable in our society away from professional landlords and agents, and into the hands of rogue landlords and agents who will exploit them,’ he added.
According to James Davis, founder of online letting agent Upad, some landlords could use it as an opportunity to put up rents. ‘The industry may well respond negatively to this announcement and suggest that landlords will simply increase rents to compensate for what they lose in deposits,’ he said.
‘But this is somewhat short-sighted as in all reality, it’s not going to change things that much,’ he pointed out, explaining that many letting agents already have deposit free listings and in practice this works well as such tenancies appeal to a greater pool of tenants and landlords find the property rents out more quickly.
He also added that it could be seen as another attempt to bash hard pressed landlords. ‘However, those who are prepared to take an innovative approach to letting their properties will soon discover that there are solutions out there that hand power back to them and allow them to manage these changes,’ he said.
