Tenant group petitions to end insured deposit schemes

A tenant advocacy organisation has submitted a petition with 17,000 signatures to Housing Secretary Angela Rayner calling for the abolition of insured deposit schemes in favour of custodial-only arrangements.

Generation Rent argues that the current system allows landlords to retain deposits during dispute processes, creating pressure on tenants to accept reduced settlements rather than challenge deductions they believe are unfair.

Dispute resolution data

According to analysis by the organisation, tenants who formally dispute deposit deductions recover an average of 79% of their deposit. However, only one in five renters facing contested deductions actually raise formal disputes, with many deterred by anticipated delays or uncertainty about their legal rights.

The petition proposes that all deposits be held in custodial schemes, which would release undisputed funds to tenants while adjudication takes place. Under the current insured model, landlords retain control of deposit funds until disputes are resolved.

Generation Rent also advocates for penalties against landlords whose claims are repeatedly rejected by deposit protection schemes, suggesting this would reduce exaggerated deduction requests.

Government review

The Government has previously indicated it is considering reforms to the rental sector, including potential changes to deposit protection arrangements. Current contracts with deposit scheme providers expire in 2028.

The organisation estimates that approximately 300,000 private renters could benefit financially from the proposed changes. Total deposits held across all schemes amount to £5.5 billion, with Generation Rent arguing that interest accrued on these funds should be directed towards tenant benefit.

Holly Williamson, Chief Executive of Generation Rent, stated: “Requiring landlords to protect money in the scheme rather than hold it themselves, will mean that they have to make any claim after the tenancy ends and return unclaimed cash to the tenant as soon as possible.”

The proposals come as rental market regulation continues to evolve, with housing security remaining a priority concern for tenants across the UK.

Market implications

For landlords and letting agents, a shift to mandatory custodial schemes would require operational adjustments, particularly in cash flow management and dispute handling procedures. The sector awaits formal Government consultation on the proposals ahead of the 2028 contract renewals.