Deposit cap will make it harder for many to rent says...

The government’s proposal to limit tenancy deposits to one month of rent and reservation fees to one week of rent will directly hurt tenants, warns lettings guru David Lawrenson.

He says the proposals - which he claims were ‘easy targets’ for a minority government badly damaged by the election result last month - will hit renters in various ways.

Lawrenson, writing on his LettingFocus newsletter, says most deposits in the private sector currently equal five to seven weeks of rent, determined by the market and the agent’s or landlord’s measure of risk for the type of tenant in question. He also says simple market facts of life mean that overly high deposits are unlikely to be charged, because they will drive renters into the hands of rivals seeking lower deposits.

But he then goes on to say certain groups will be even more excluded from the market for private rented properties “especially those folks who are on low incomes and those who are benefit dependent.”

This is because, for example, people with no lettings history in the UK and so no past landlord reference, will present a higher risk; people whose incomes are low and the housing benefit dependent will also be at a higher risk of not paying the rent; likewise students, often considered less good at looking after the properties they rent; and those who have pets - they will all be considered a higher risk than alternative tenants.

“All these groups will find it harder to rent if a cap on deposits of a month of rent becomes law. Landlords will simply charge them a higher rent or, more likely, not rent to them at all. So, this proposal will hurt many of the more marginal tenants whose housing options are already limited” insists Lawrenson.

Lawrenson returns to his long-held opinion that much more transparency would be achieved by forcing portals such as Rightmove and Zoopla to display fees when advertising homes to let. He feels this would drive down “rapacious” letting agency fees on tenants and create a clearer, more accountable and transparent market.