Letting agent: proposed fee ban could mean rent hikes

Steve Harris, founder of Bristol letting agency Abode Property Management, says the fees ban proposed by the Chancellor in the Autumn Statement will lead to a hike in rents.

The Chancellor Philip Hammond announced the government’s intention to, “ban fees to tenants as soon as possible,” calling the practice of charging tenants high letting fees, “wrong,” and saying that they often run into hundreds of pounds.

The government is expected to put the ban to consultation before it comes into force.

Steve Harris called the proposed ban, “draconian,” and predicted that landlords would attempt to cover the the extra costs by demanding higher rents. He called for further regulation, predicting that some letting agents would develop, “backdoor ways of charging fees.”

 

‘Fees far from exploitative’

In the wake of the Chancellor’s announcement, the managing director of the Association of Residential Letting Agents (ARLA) released a statement which branded the proposal an, “assault on the sector.”

He argued that higher rents would be the result of a ban, and that the increase in rents would mean the government’s proposal failed to assist those it says it was looking to help. Mr Cox also claimed that the average fee charged by ARLA licensed agents is £202, which he described as, “reasonable and far from exploitative.”

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We collected pre-deposit agency fees figures from ten Bristol lettings agents, based on the assumptions that our hypothetical tenant would be one of two tenants sharing a two bedroom flat at the latest average Bristol figure available of £1,026.

No pets or guarantors are included in our calculations. The results are shown above, with all three of the lowest, highest and average figures for our ten Bristol agencies being 22%, 100% and 231% respectively above the ARLA average quoted by Mr Cox.

‘Rents will go up’

Bristol residents were anxious that, although landlords may feel the pinch first, the lost revenue as a result of the ban will eventually be raised by squeezing tenants.

‘Ban won’t raise rents’

But following the ban of letting agent fees since 30 November 2012 in Scotland, housing and homelessness charity Shelter released a report which surveyed 50 Scottish letting agencies. The charity asked agency managers what impact the clarification on fees had on their business, and, “not one,” agency manager interviewed said it had a large negative impact. Less than one in five (17%) of letting agency managers said they had increased fees to landlords.

In welcoming the Chancellor’s Autumn Statement Vicky Spratt, leader of the Make Renting Fair campaign which sought to end agency fees, took to Twitter to cite the Shelter report and attempt to calm tenants’ nerves:

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