Renters lose £169m in deposit interest every year – Claim Generation Rent

Private renters across England and Wales are being deprived of £169 million in potential interest from their tenancy deposits each year, Generation Rent says.

It says that with £5.37 billion in deposits held in government-accredited schemes generate just £17 million in benefits annually under the current system.

The organisation is now calling for a Renters’ Support Fund, inspired by an Australian model, which would consolidate existing deposit schemes into a single, non-profit custodial system.

This would ensure all deposits earn interest for tenants, rather than landlords or agents.

It also says that the money generated will help tenants sue landlords over their living conditions.

Take action against landlords

Generation Rent’s deputy chief executive, Dan Wilson-Craw, said: “Renters face many disadvantages in the housing system.

“Around half lack savings, making moving home a more painful process than it should be.

“Limited access to legal support means it is hard to take action if your landlord is failing to keep your home safe.”

He added: “So 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.

“With deposit schemes’ contracts up for renewal, the government has a golden opportunity to get renters’ money working for renters.”

Interest paid to tenants

Generation Rent claims that if the entire deposit pool were invested at the Bank of England’s 4.25% base rate, it could yield £226 million annually.

After accounting for £40 million in administrative costs, the remaining funds could support tenants in multiple ways.

That would include £50 million to bolster legal aid, enabling renters to challenge landlords over unsafe living conditions.

Another £25.5 million would facilitate deposit ‘passporting’, allowing tenants to transfer deposits between tenancies, cutting moving costs by an average of £817.

Also, £6.7 million would support deposit guarantee schemes for renters facing financial hardship or homelessness.

Generation Rent says that any surplus interest could be returned to tenants, separate from landlord claims.

Ditch three deposit schemes

Generation Rent is now urging the government to phase out these insurance-backed schemes in favour of a unified custodial model.

Its research also found that 16% of tenants borrowed to cover moving costs, while 29% dipped into savings.

For those unable to afford deposits, unregulated ‘deposit alternative’ products—often non-refundable fees—are common, particularly among disadvantaged groups.

Seven percent of tenants used such schemes, with 51% receiving benefits and 28% reporting disabilities, compared to 39% and 24% of the overall sample, respectively.

This reliance on costly alternatives underscores, the organisation says, a ‘poverty premium’ for vulnerable renters.