Trade body urges government rethink on security deposit cap

Housing minister Alok Sharma has been told face to face that he should rethink the government's plans to cap security deposits to one month’s rent.

Richard Lambert, chief executive of the National Landlords' Association, met with Sharma and pressed him to scrap the plans that will form part of the draft Tenants’ Fees Bill, announced earlier this year in the Queen’s Speech.

Data derived from over 20,000 tenancy contracts created using the NLA’s website indicates that the average deposit - of those landlords taking a deposit - is currently 4.92 weeks’ rent. There is no evidence to suggest that landlords are charging unnecessarily high security deposits.

The NLA believes that imposing an arbitrary cap on security deposits of one month’s rent would have unintended consequences, which could be damaging to certain groups of prospective tenants. 

It could also have the counter-productive effect of reducing some households’ abilities to secure suitable accommodation in the sector.

The NLA Quarterly Research Panel recently found that almost a third of landlords had experienced property damage due to the actions of a tenant in the last 12 months. 

This was higher for landlords who let to housing allowance claimants (53% per cent) and recipients of other benefits (56 per cent). 

The association says that if landlords operating in certain markets are not confident in their ability to mitigate the financial impact that the higher likelihood of property damage could entail then they may move away from offering properties to the 'riskier' tenant groups.

It adds that while not the intention, the government’s plans for imposing this one-month cap on security deposits could also reduce landlords’ willingness to accept tenants’ requests to modify tenancy conditions and agreements.

An example would be to allow tenants to keep pets at the property. A one month’s rent cap would reduce landlords’ willingness to allow pets by removing their flexibility to take a higher deposit to cover for pet damage. Previous research from the NLA showed that almost half (47 per cent) were unwilling to allow pets, with 41 per cent of those citing the reason as potential property damage.

Instead of this cap, the NLA says the upcoming draft Tenants’ Fees Bill should be used to provide more innovative solutions that appreciate the reasons landlords require deposits, while also improving tenants’ ability to move around in the sector. 

For example, it suggests the government should be looking to allow passporting of undisputed deposits between tenancies and providing funding for Government-backed deposit schemes to help vulnerable people.