Tenancy deposit reform ‘overlooks’ estimated £750m

Agency software provider The Letting Partnership has queried why unclaimed deposits are absent from discussions on deposit reform.

Earlier this summer, Housing Minister Matthew Pennycook confirmed the Government is considering removing insured tenancy deposit schemes as part of a wider review of the tenancy deposit protection system.

But new analysis by The Letting Partnership estimates that in England and Wales around £750million could currently sit within the tenancy deposit system as dormant or otherwise unclaimed balances.

Nobody can say with confidence what the true scale actually is.”

Unlike England and Wales, Scotland has already legislated for dormant tenancy deposits, establishing a process that allows eligible unclaimed funds to be directed towards housing-related causes after appropriate safeguards and timeframes have been met.

Chris Mason (pictured), Chief Operating Officer at The Letting Partnership, suggests ongoing tenancy deposit reform presents an opportunity to consider whether a similar framework should be introduced in England and Wales.

He said this would bring greater transparency to the treatment of long-term unclaimed balances while providing certainty for tenants, agents, landlords, and deposit protection providers.

Governance questions

Mason says: “The tenancy deposit reform debate has understandably focused on how deposits should be protected in the future, but there is a wider governance question that also deserves attention.

“At present, there is no legislative framework in England and Wales governing dormant tenancy deposits, nor is there any official reporting mechanism that reconciles deposits held within the protection schemes against those that remain active within letting agents’ portfolios. That means there is no clear picture of how many deposits may simply be sitting within the system after tenancies have ended.

Our modelling suggests the figure could be significant, potentially running into the hundreds of millions of pounds.”

“Our modelling suggests the figure could be significant, potentially running into the hundreds of millions of pounds, but without that reconciliation mechanism in place, nobody can say with confidence what the true scale actually is.

“Our analysis is an attempt to start that conversation. Before deciding how the system should operate in the future, it’s important to understand the one we already have and whether there is an opportunity to bring greater transparency to balances that may otherwise go unnoticed.”