Campaigners claim the deposit scheme is lining the pockets of “unscrupulous landlords” by failing renters.
Dan Wilson Craw of Generation Rent, the campaign group which conducted the research, said the system was “failing renters who are put off from challenging unfair deductions by unclear rules, and threats and delaying tactics from landlords”.
He added: “Ultimately, that puts millions more in unscrupulous landlords’ pockets. The uncertain timescales and unclear rules of the deposit system, as well as obstructiveness and threats from some landlords, mean that accepting unfair deductions to get some cash back quickly can feel like the better option.”
The research, based on a nationally representative survey of 2,000 private renters, found that a quarter of tenants who did not challenge unfair deductions said their landlord either threatened to make a larger claim if they raised a dispute, refused to take part in the adjudication process or had not protected the deposit in the first place.
According to the latest data from one deposit protection scheme, TDS, 77% of tenants got some of their disputed deposit back and 32% got all of it back. Generation Rent analysis found tenants who disputed deductions won 79% of the disputed money back on average.
Craw continued: “Because challenging deposit deductions is usually worth it, renters put off from doing so are losing hundreds of pounds of their own money.
“The government’s review of deposit protection is an opportunity to build trust in the system so tenants have the confidence to challenge unfair landlord claims.”
Ministers have said they were reviewing the system and “identifying areas for improvement”.
Generation Rent said it wanted to see a 14-day deadline for deposits to be returned at the end of a tenancy and landlords to be legally compelled to take part in a dispute resolution if a tenant pursued it, with disputes resolved within 10 days.
It also said landlords and agents who broke the rules, or made repeated excessive deductions, should face “meaningful penalties”.
A Ministry for Housing, Communities and Local Government spokesperson, told the press: “It is completely unacceptable to unfairly withhold a tenancy deposit, and this government is cracking down on rogue landlords who make tenants’ lives a misery.
“Our renters’ rights Bill will give councils stronger investigatory powers, for example making it easier to get financial information from landlords suspected of abuses.”
