The government is facing calls to include a mandatory tenancy deposit scheme in its forthcoming housing legislation.

A joint report published on Wednesday by Shelter and Citizens Advice estimates that nearly £800 million of tenants' deposits are wrongly being kept by landlords, with no legal recourse available.

A spokeswoman for ODPM told ePolitix.com: "The government recognises a significant minority of tenants are affected by the unprofessional conduct of some landlords in the treatment of tenancy deposits. In March 2000 we launched a pilot tenancy deposit scheme to look into this problem, but take-up was poor and further consultation indicated there was no robust support for a compulsory scheme.

"Importantly the Law Commission is currently undertaking a review of housing tenure which could help deal with this problem through stronger contractual agreements, and we await their report and legislative proposals with great interest."

Forum Response: Shelter

Ben Jackson, director of external affairs at Shelter, said: "Most of us can ill afford to lose the hundreds of pounds we pay as a deposit to rent a home. Yet frequently tenants simply accept this loss as one of the hazards of renting.

"Each year tens of thousands of people lose out to this scam and are often forced into crippling debt to pay the next deposit, a few even face the extreme outcome of homelessness.

"The government must protect the people who are being cheated out of their money and listen to all those - including its own backbenchers - who support a tenancy deposit scheme. There is no excuse to let this rip off continue."

Forum Response: British Property Federation

Ian Fletcher, director (commercial and residential) at the British Property Federation, told ePolitix.com: "The figures being quoted by Shelter and the Citizens Advice Bureau today fundamentally weaken their case - £20 million of the £800 million on deposit they cite is wrongly withheld, just 2.5 per cent of all deposits. Yet, totally unfairly they advocate regulating the vast majority of innocent landlords for the misdemeanours of a few.

"The BPF would support some kind of compulsory mediation in the 2.5 per cent of deposits that are disputed each year, but not blanket regulation of the 97.5 per cent that are not.

"The government has said that there is not a robust case for legislating and has commissioned independent research, from a university, which has concluded the same. If the government were to regulate along the lines being proposed it would fly in the face of their own regulatory guidance, which says that regulations should be proportionate and targeted.

"The campaign slogan is 'stop the tenancy deposit rip off', but the only rip off here is a concerted push for legislation, whose case is unproven and which would be totally unfair."

Forum Response: Consumers' Association

Emma Harrison, senior public affairs officer at the Consumers' Association, told ePolitix.com: "Consumers' Association welcomes the campaign to introduce a national tenancy deposit scheme. As Shelter and Citizens Advice point out, the vast majority of arguments between tenants and landlords are over deposits.

"In April 2001, Which? published research revealing that many tenants were refused the refund of their deposits based on what we believe to be spurious reasons. For example, one person we interviewed had £300 of her deposit held back as the landlord complained that the she couldn't see her reflection in the letterbox and therefore the tenant hadn't properly maintained it.

"This and many other examples demonstrate the need for a national scheme and we hope that the government will introduce legislation to ensure that consumers aren't ripped off by unscrupulous landlords and letting agents. However, Consumers' Association warns that any scheme introduced has to be compulsory."

Forum Response: The Law Society

A spokeswoman for The Law Society told ePolitix.com: "Proper management of deposits is a significant issue and the Society welcomes the government's consultation setting out various options of achieving effective management of deposits including the means for resolving disputes.

"If disputes about deposits are not resolved satisfactorily, tenants may not have the necessary funds to move onto the next property in the private rented sector. This affects people's mobility and may exacerbate homelessness."