The Lettings Fee Ban could entirely shift landlords’ income models. We asked landlords their views and opinions on the upcoming law, and you can read the results below.
Announced in last year’s Autumn Statement, reiterated in the Queen’s speech in June, and discussed in Westminster Hall last week, an outright ban on letting agent fees charged to tenants is expected to be implemented at some point over the next year. The ban would mean tenants in England will no longer have to pay anything other than rent and a refundable deposit. According to lettings agencies’ associations, the lettings fees ban would also mean a massive loss of jobs in the lettings industry and ultimately an increase in rents, as agents unable to charge fees from tenants for taking references, getting credit checks, or investigating immigration status will charge landlords, who will in turn raise rents to cover the expenses.
Many landlords have no idea what’s coming
Surprisingly, 29% of landlords surveyed were completely unaware of the bill and 14% were only somewhat aware. Interestingly, nearly half of those unaware of the ban live in London, where stamp duty taxes on second homes have restricted the number of properties bought by landlords, and already led to significant rent increases.
Over half of respondents (52.25%) think that in the most likely scenario letting agents will pass on these fees to landlords, who will increase rents to avoid losses. Letting industry bodies predicted agents will pass only 75% of the costs to landlords, so the impact on landlords might me lower than they expect.
The lettings fee ban will ultimately result in better cheaper service
More than a third (37%) of respondents agree with the government’s argument that ultimately the ban will force agents to become more competitive and provide better service for landlords.The ban will increase letting agents’ incentives to compete for landlords’ business. Landlords will be empowered to shop around for the agent that provides the quality of service that they are seeking, at a price that they are willing to pay.
A deposit cap would hurt the most vulnerable tenants
The initial proposal also included capping the security deposit that can be charged to tenants to one month’s rent. Following the consultation on 6 September, Housing Minister Alok Sharma confirmed that holding deposits will be excluded from the legislation. Nearly half of landlords (49%) felt that a deposit cap would mean they would be less likely to rent properties to tenants with a poor credit history – as they wouldn’t be able to ask for a higher deposit to mitigate the risk of financial loss.
Will the ban mean longer term contracts?
Opinions are mixed on whether the lettings fee ban will influence the length of rental contracts. At the moment most traditional letting agents charge tenants letting fees at the outset, renewal and conclusion of a tenancy, with little to no opportunity for a tenant to opt-out of payment. According to the bill proposers, this creates an incentive for short-term lets. The repeated churn in tenancies prompts business for an agent, and the opportunity to charge fees. The ban on tenant fees may help to promote longer term tenancies by reducing the financial incentive of short-term lets.
38.89% of our respondents think that the ban won’t have any effect on the length of the contracts while 37.04% think this will result in longer term tenancies, and the rest are undecided.
Most landlords think a cap on lettings fees would actually work better
At the moment renters pay an average of £200-£300 in letting fees per tenancy, although many pay significantly more than this – one in seven renters pay £500 or more. Most landlords (57.41%) think that a cap on letting fees for tenants will work better than an outright ban. But according to Alok Sharma, a rental fees cap is not a viable alternative for the government.
We agree with the 37% of landlords that the ban will force further transparency in the lettings market, which is ripe for disruption and requires a complete overhaul. At Howsy we proved since the beginning that tenant fees are unnecessary. Better organisation and a clever use of technology keep our landlord fees low, and our tenant fees 0. Find out more about how Howsy works here.