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.”
Data obtained through Freedom of Information requests revealed 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.
But 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%.
Locking up cash can leave tenants out of pocket and one in four renters told the survey that they have had to borrow money from friends and family at the beginning of their current tenancy.
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A further 14% used credit cards or loans, a third relied on savings while only 29% had enough cash in their account to cover their costs.
However, the research showed that the current mechanism for disputing deposits that are not being repaid are serving tenants well, but the process is time consuming and off-putting.
Only one in five renters quizzed in the poll used the deposit scheme’s dispute resolution service while 18% of respondents could not dispute their claims because their landlord had broken the law by not protecting their deposits.
Just under a fifth of renters said they were unaware of their rights to dispute deposit deductions while 13% said they feared it would take too long. One in 10 said they worried that they did not have enough evidence.
Of the 35 tenants in the 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. Just three came away with less money than the landlord had proposed.
The Westminster government is currently reviewing the operation of tenant deposit schemes as part of a re-procurement process.
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Ministers are also bringing forward the Renters’ Rights Bill in England with the legislation currently making its way through the House of Lords.
The legislation is set to make few changes to the deposit system but will restrict landlords to a maximum of one month’s rent in advance alongside a security deposit of five or six weeks’ rent.
Meanwhile, research from a Scottish rent deposit scheme shows a third of private renters are finding it difficult to pay their rent each month.
A SafeDeposits Scotland Charitable Trust survey of 1,000 renters found 24% find keeping up with monthly payments difficult while 8% find it very difficult.
The SafeDeposits research shows that 49% of tenants say they regularly make cuts to household essentials such as food, heating and clothing in order to pay the rent.
A total of 39% of tenants said they struggle to afford their utility bills, rising to 57% for those in the Highlands where properties are often unable to access mains gas.
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Despite concerns about affordability, the 89% of tenants had not approached Rent Service Scotland or tribunals to contest unreasonable rent increases.
Dr Jennifer Harris, head of policy at SafeDeposits Scotland, said: “Affordable homes to rent should be a cornerstone of the sector across Scotland. However, our research shows the struggles many tenants continue to face in paying their rent each month.
“Improving affordability will require a comprehensive strategy for the sector. It needs to include ensuring there are enough homes to rent to meet demand, alongside measures to support tenants’ incomes. This is especially important for all those tenants who face the prospect of their housing benefit rates being frozen.”
The research comes as temporary restrictions capping the amount a landlord in Scotland could raise their rent to 12% ended this month.
Research from Generation Rent found an eightfold increase in renters challenging rent hikes under the restrictions with Rent Service Scotland now using open market rents to determine rent tribunal cases.
The Scottish government is currently legislating to bring in a permanent rent cap through the Scottish Housing Bill with the rent controls capping rises to a maximum of 6% and set to come into force in 2027.
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