“We are missing out on £80m each year”: Why landlords should pay interest on tenants’ deposits

Renters are richer than they think. Image: Getty.

One of the consequences of The Rent Being Too Damn High is that private tenants have barely anything left over at the end of the month to put aside for a rainy day – let alone a home they can own. Last year’s English Housing Survey uncovered the astonishing finding that two thirds of the private renter population have no savings or investments.

Even if you’re fortunate enough to be able to save, the rewards for doing so are pretty meagre. To get a rate as generous as 2.5 per cent, you need to lock your money away for effectively as long as you’re a renter, with Barclays’ Help to Buy ISA (with an extra bonus from the government if you actually buy a house).

But even for most of the 66 per cent without savings, there’s another pot of money that’s held on the same basis but attracts zero interest whatsoever: the tenancy deposit.

Tenants hand over this sum, usually worth between four and six weeks’ rent, at the start of the tenancy to pay for any damage they cause or unpaid rent when they move out. The cash is either held by the landlord or letting agent and insured through a protection scheme, which arbitrates any disputes, for as little as £9.50; or it’s lodged with the scheme itself (known as custodial).

More than £4bn of tenants’ money is protected across the various schemes. Because you have to put down a deposit on a new tenancy before you get your old one back, it means the funds are incredibly stable, and should therefore attract a reasonable interest rate, even after deducting the costs of running the schemes. Yet few tenants see any return: Generation Rent estimates that we are missing out on £80m each year.

When we asked renters if they got interest when their last tenancy ended, just 2 per cent said yes. The government has already recognised this unfairness and asked custodial schemes to start distributing it. They have not – though, to be fair, the government has retained restrictions on how they can invest the money.

The custodial scheme is free for agents and landlords to use. Yet information we obtained through Freedom of Information revealed that most deposits are insured, and the average value of an insured deposit is £1,240: £373 higher than the average of £867 held in custodial schemes. This can only mean that it is somehow lucrative for agents to pay that small insurance premium, in order to hang on to large amounts of cash.


Our survey found that only 2 per cent of tenants whose deposits are insured are entitled by their tenancy agreement to receive interest. In comparison, one in four agents allocate that interest to themselves. Most tenancy agreements appear not to cover this.

Whatever actually happens to tenants’ deposits, the system is set up to give agents access to an incredibly cheap loan, with no benefit to their creditor. If they go bust, indeed, their creditor gets less than no benefit.

This has prompted some firms to set up deposit-free schemes, where the tenant hands over an insurance premium and can keep the rest of the deposit. But with most tenants getting their deposit back in full, they would be losing money by using such a scheme – and tenants with claims against them continue to be liable for damage and rent arrears.

These schemes are simply creating another poverty premium, taking advantage of those tenants with no savings. We don’t need a deposit system that makes money out of tenants: tenants need to make money out of the system.

That’s why Generation Rent is proposing to scrap the insurance schemes completely and reconfigure the custodial schemes so that the tenant, not the landlord, opens the account. When the tenant pays their final month’s rent, an equivalent portion of the deposit would be made available to put down on their next home (the landlord could still make a claim on the remainder once the tenant moves out). If adopted in the forthcoming Tenants’ Fees Bill, this policy could treble the short-term savings that the letting fees ban would create on its own, reducing the need to borrow or raid savings when moving home.

Personal tenant accounts would also make it much easier to distribute interest. And because less cash physically changes hands, less is needed to distribute between tenancies: £57m, we reckon. That leaves the vast bulk of tenants’ money that could be invested. If £4bn went into building community-led housing schemes, we think 35,000 homes could be built over five years.

That would not only give tenants a decent return on their own money, but it would play a role in bringing down rents, making it easier to save properly – or, to generally have nice things.

Dan Wilson Craw is interim director of Generation Rent.

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London’s rail and tube map is out of control

Aaaaaargh. Image: Getty.

The geographical limits of London’s official rail maps have always been slightly arbitrary. Far-flung commuter towns like Amersham, Chesham and Epping are all on there, because they have tube stations. Meanwhile, places like Esher or Walton-on-Thames – much closer to the city proper, inside the M25, and a contiguous part of the built up area – aren’t, because they fall outside the Greater London and aren’t served by Transport for London (TfL) services. This is pretty aggravating, but we are where we are.

But then a few years ago, TfL decided to show more non-London services on its combined Tube & Rail Map. It started with a few stations slightly outside the city limits, but where you could you use your Oyster card. Then said card started being accepted at Gatwick Airport station – and so, since how to get to a major airport is a fairly useful piece of information to impart to passengers, TfL’s cartographers added that line too, even though it meant including stations bloody miles away.

And now the latest version seems to have cast all logic to the wind. Look at this:

Oh, no. Click to expand. Image: TfL.

The logic for including the line to Reading is that it’s now served by TfL Rail, a route which will be part of the Elizabeth Line/Crossrail, when they eventually, finally happen. But you can tell something’s gone wrong here from the fact that showing the route, to a town which is well known for being directly west of London, requires an awkward right-angle which makes it look like the line turns north, presumably because otherwise there’d be no way of showing it on the map.

What’s more, this means that a station 36 miles from central London gets to be on the map, while Esher – barely a third of that distance out – doesn’t. Nor does Windsor & Eton Central, because it’s served by a branchline from Slough rather than TfL Rail trains, even though as a fairly major tourist destination it’d probably be the sort of place that at least some users of this map might want to know how to get to.

There’s more. Luton Airport Parkway is now on the map, presumably on the basis that Gatwick is. But that station doesn’t accept Oyster cards yet, so you get this:

Gah. Click to expand. Image: TfL.

There’s a line, incidentally, between Watford Junction and St Albans Abbey, which is just down the road from St Albans City. Is that line shown on the map? No it is not.

Also not shown on the map: either Luton itself, just one stop up the line from Luton Airport Parkway, or Stansted Airport, even though it’s an airport and not much further out than places which are on the map. Somewhere that is, however, is Welwyn Garden City, which doesn’t accept Oyster, isn’t served by TfL trains and also – this feels important – isn’t an airport.

And meanwhile a large chunk of Surrey suburbia inside the M25 isn’t shown, even though it must have a greater claim to be a part of London’s rail network than bloody Reading.

The result of all these decisions is that the map covers an entirely baffling area whose shape makes no sense whatsoever. Here’s an extremely rough map:

Just, what? Image: Google Maps/CityMetric.

I mean that’s just ridiculous isn’t it.

While we’re at it: the latest version shows the piers from which you can get boats on the Thames. Except for when it doesn’t because they’re not near a station – for example, Greenland Pier, just across the Thames to the west of the Isle of Dogs, shown here with CityMetric’s usual artistic flair.

Spot the missing pier. You can’t, because it’s missing. Image: TfL/CityMetric.

I’m sure there must be a logic to all of this. It’s just that I fear the logic is “what makes life easier for the TfL cartography team” rather than “what is actually valuable information for London’s rail passengers”.

And don’t even get me started on this monstrosity.

Jonn Elledge is the editor of CityMetric. He is on Twitter as @jonnelledge and on Facebook as JonnElledgeWrites.