The Government has announced that it is to cap Tenancy Deposits at 5 weeks rent.
This article is from Property Industry Eye:
Agents and landlords have united against what is being seen as the latest attack on the private rental sector by the government.
In May the government said it would cap deposits at six weeks rent but yesterday it reneged on the agreement saying it would be five weeks for annual rentals of under £50,000 and six weeks for above.
The industry is furious.
David Cox, chief executive of Propertymark, says: “Once again 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. 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.”
David Smith, policy director at the Residential Landlords Association – which had already voiced its disapproval about the idea when it was suggested last weekend- now says: “In doing a complete about turn on this, it is unfortunately vulnerable and elderly tenants who will suffer, just as ministers stated when they initially approved a six week cap. Those who will now find it more difficult to secure a home to rent will include those on benefits and those who have a pet as a companion.”
He continues: “In May, Ministers argued that a cap of six weeks offered a balance between affordability benefits and financial risk to landlords and providing confidence for them to rent to higher risk tenants. They considered that a five week cap did not offer that protection. Nothing appears to have changed since.”
And Jon Notley, chief executive of the Zero Deposit scheme, adds: “It is not sensible to impose a cap that – after a single month’s rent – leaves landlords with very little protection. The objective in terms of improving tenant affordability is both clear and necessary but there are already services on the market that offer the same protection as a traditional six-week deposit for the landlord at the cost of just one week’s rent to the tenant. The rental market needs reform, but not in areas where solutions already exist to address its problems.”
In my opinion, I believe that rents will increase to compensate for the potential shortage of funds available at the end of a tenancy should there be rent arrears and/or dilapidations. The fact that cap is calculated as ‘weekly’ when the industry deals in ‘monthly’ will make calculations difficult to understand for some tenants.
A £500.00 per calendar month rent will mean a £576.92 deposit!