The Liberal Democrats have announced plans to provide government loans for tenancy deposits to help young people to rent their first home.

The party’s proposed “help to rent” scheme would allow people aged 18 to 30 to borrow up to £1,500 (£2,000 in London) from the government to use as a deposit on rented accommodation. The loans would be repaid over a period of either 12 or 24 months.

The party says many young people are struggling to save deposits to rent without help from family members, forcing them to live with their parents for longer. The average rental deposit in the UK is £1,200, usually six weeks of rent.

Leader Nick Clegg, travelling on the Lib Dem campaign bus in south-west England on Thursday, said: You’ve got this generation that is sometimes called ‘the clipped wing generation’, or ‘the boomerang generation’, of an increasingly large numbers of youngsters – I think the estimates are now about 2m people in their 20s and 30s – who simply can’t find the money needed for a deposit to rent a flat or home of their own.

“They simply can’t find the up front costs to move into rented accommodation, so move back or stay with their own parents. That’s obviously unfair on them, because it means they’re just not getting their feet on the rung of the rented property ladder.”

Clegg said the fact that young people were unable to move out of their parents’ homes had a negative effect on the property market.

“It means that couples whose children have grown up are not downsizing as readily as they might because they have to keep large properties to maintain space for their kids. So we have a very simple idea which is in effect to extend a system of government loans,” he said.

To be eligible for the proposed loans, tenants would need to be aged 18 to 30, in paid employment and not be home owners or seeking social housing tenancy. Once paid off, the money could used for future rental properties. The interest rate would be pegged to the cost of government borrowing (currently approximately 2.5%).

Clegg said the policy would not “cost the government much in terms of year-in, year-out expenditure” and stressed that, as it was a loan, it counted as an asset not a liability, so the loan would not count against the national debt.

“For those parents who want their kids out of their hair, it will give them their own home back and for those parents who want to downsize, it frees them up as well,” said Clegg.

“It’s trying to address the barriers to market entry, the up front costs, much like we are trying to address the up front costs of a deposit on a mortgage.”

All of the main political parties have made substantial offers on housing policy during the general election campaign. The Labour party has pledged to introduce three-year tenancy agreements with strict rules to make it more difficult to evict tenants, while the Conservative party have committed to a help-to-buy ISA, announced in the March budget.

The Lib Dems have previously announced proposals to build 300,000 new homes a year and a “rent to own” scheme to help first-time buyers get on the property ladder by renting their way to ownership.