A deposit cap of six weeks’ rent will continue to apply where the annual rent is £50,000 or more.
The move is a further step towards ending costly fees imposed on tenants when they first move into their property, communities secretary James Brokenshire said.
Around one in three renters who currently pay a deposit are set to benefit from the change, saving tenants £64m in the first 12 months, according to the ministry of housing.
Other amendments to the bill include protecting tenants from unfair fees by limiting the type of default fees that can be charged by landlords and property agents.
This change means that during the tenancy landlords and agents will only be able to charge fees to replace lost keys or for late rent.
Landlords will still be able to claim back costs for damage through the tenancy deposit at the end of the tenancy.
However, landlords and agents will not be able to write different default fees into a tenancy contract and tenants cannot be charged hundreds of pounds for a damaged item that actually only costs a few pounds to replace.
Communities Secretary Rt Hon James Brokenshire MP (pictured) said that these amendments will make renting a home of your own more affordable, fairer and transparent, enabling tenants to keep more of their cash and stopping unexpected costs.
He added: “Everyone deserves a home to call their own. Yet for some renters, moving to a new house can be difficult due to high upfront costs and letting fees.
“This is unacceptable. I want to see a housing market that truly works for everyone, and one which provides a better deal for renters.”
Landlords criticise government’s decision
However, two landlords associations criticised the proposed cap on security deposits.
Policy director for the Residential Landlords Association, David Smith, said that landlords will feel badly let down by the government.
He added: “In doing a complete about turn on this, it is unfortunately vulnerable and elderly tenants who will suffer, just as Ministers stated when they initially approved a six week cap. Those who will now find it more difficult to secure a home to rent will include those on benefits and those who have a pet as a companion.
“In May, Ministers argued that a cap of six weeks offered a balance between affordability benefits and financial risk to landlords and providing confidence for them to rent to higher risk tenants. They considered that a five week cap did not offer that protection. Nothing appears to have changed since.”
Richard Lambert, chief executive officer of the National Landlords Association, said that a six week cap is the lowest landlords find acceptable.
He added: “All this will do is make it harder for tenants with poor credit ratings or who want to have a pet to find a suitable home. This is clearly a political move aimed at the renters’ vote. It is not a policy for business.”