Member Article

Inflation rise sees renters £880 out of pocket

Inflation is at its highest rate for two years – and renters are left paying the price.

Figures from the Office of National Statistics show that inflation calculated using the Retail Price Index has risen to 2% – more than double this time last year.

This means an average rental deposit loses £23 of its value every for every year of a tenancy – 18% more than just four weeks ago.

Research earlier this year showed inflation leaving renters as much as £420 out of pocket on their tenancy deposits – even in the 97% of cases when they are returned untouched.

The research, from deposit-free renting solution Dlighted and lettings firm KIS, examined the impact of inflation on the value of deposits when they are returned to renters at the end of their tenancy.

The figures showed that with the cost of living rising at 1.6% a year – as it was at that point - the average UK tenancy deposit of £1169 was worth £19 a year less in real terms at the end of a standard two-year tenancy – a loss of £38 to the renter.

With RPI inflation now running at 2% this figure has risen to £23 – a loss of £46 over the life time of the tenancy.

Londoners are left worst off, with their deposit of £2499 losing £96 in value over the course of a two-year tenancy. North Easterners, meanwhile are the least affected - left just £32 worst off.

With the average person buying their first property at the age of 31 an average renter now stands to lose the equivalent of £256 from the value of their deposit before becoming a home owner – a rise of £52 since September.

In London that loss rises from £105 to £525. The decline in the value of deposits caused by inflation in KIS’ native North East goes up by £35 to £177.

Compared to the same money instead being invested in a saving account at a rate of 3%, renters net loss is £880 (UK) and £1195 (London).

Anti-deposits campaigner Ajay Jagota responded to the figures.

The founder and Managing Director of sales and lettings firm KIS and deposit-free rental solution Dlighted is in dialogue with new Housing Minister Gavin Barwell about the need to reform rental deposits.

He said: “In 97% of cases tenants can expect to see their rental deposits returned, but the impact of inflation means the cash they get back won’t be worth as much as the cash they handed over – even if it’s the same amount!

“By the looks of things that is only going to get worse. One of the levers the Bank of England can use to control inflation is raising interest rates – meaning that those renters won’t just see their deposits devalued, they’ll also be missing out on the interest they would be gaining if they were able to save that money instead.

“If interest rates and inflation both end up around 3.5% within the next couple of years, that’s a net loss to renters of 7% a year – meaning that over the course of a typical decade in the private rented sector tenants will see their original deposit lose almost all of its value.

“They might only be out of pocket by a few pounds a year, but in the context of overall rising cost of living it will make it harder and harder for renters to put the money away for a deposit for a place of their own.

“The people affected will be exactly the people Theresa May says she wants to help, and I look forward to hearing the developing thoughts of the new Housing Minister.”

This was posted in Bdaily's Members' News section by Ajay Jagota .