If you’re renting in England or Wales, there’s a good chance you’ve handed over a big chunk of cash as a deposit. It’s meant to protect your landlord if something goes wrong, but while your money sits there, someone else is making all the gains.
The shocking numbers behind the scandal
Research by campaign group Generation Rent has revealed that renters are missing out on a staggering £169 million in interest. That’s because the £5.37 billion tied up in tenancy deposit schemes isn’t working in renters’ favour. Instead, in many cases, the interest benefits landlords or simply disappears into the system.
For context, landlords are legally required to protect deposits in one of three government-approved schemes.
They can either:
- Hold the deposit themselves and pay for insurance, or
- Place it in a scheme free of charge.
But here’s the kicker: under the insurance option – which covers around £2.9 billion of deposits – landlords can pocket the interest. Meanwhile, tenants get nothing back. Not a penny.
Why this matters for renters
Moving home is expensive. According to polling by Generation Rent, 16% of renters had to borrow money to pay their last deposit, and nearly a third (29%) had to dip into savings. At a time when many of us are feeling the pinch, this seems more than a little unfair.
Dan Wilson-Craw from Generation Rent put it bluntly:
“It is a scandal that the billions of pounds of renters’ money tied up in deposit schemes is not being used to improve the experience of renting, and in many cases sees landlords and letting agents collecting the interest.”
What’s the solution?
Generation Rent suggests pooling deposit money and investing it. The returns could then fund things renters really need, like:
- Legal support when landlords fail to maintain safe homes.
- Deposit guarantee schemes for people struggling with upfront costs.
It’s an idea that could transform renting from a financial headache into something a little fairer.
The government’s next move
The Housing Secretary’s team says they’re reviewing the deposit system as part of the Renters’ Rights Bill, which already promises to ban no-fault evictions and crack down on unfair rent hikes. That’s a start. But with billions of pounds at stake, this review needs to go further.
Because here’s the truth: your money should work for you, not sit in a pot earning interest for someone else.
