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

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

The prediction is based upon two papers by the Office of the Deputy Prime Minister, which claim that more than 1.5 million tenants pay an average £510 in deposit, with £20.1 million wrongly withheld each year.

Nearly 150 MPs have signed an early day motion in support of a deposit scheme, which also has the backing of the Consumers' Association, the Association of Residential Letting Agents, the Local Government Association and the Law Society.

"Most of us can ill afford to lose the hundreds of pounds we pay as a deposit to rent a home," said Ben Jackson, Shelter's director of external affairs.

"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, and 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."

David Harker, chief executive of Citizens Advice, described the current situation as "a scandal".

"Too many landlords treat rent deposits as their own money, instead of money handed over to them in trust," he said.

"Many do not even bother to give tenants a proper reason for failing to pay it back.

"It is a scandal for this state of affairs to be allowed to continue when a simple, tried and tested solution is available."