Leaked a day before his Autumn Statement speech, Philip Hammond’s announcement to ban lettings fees from agents on the rental market were met with mixed reactions from industry professionals, despite the apparent excellent news for renters themselves.
Those in the buy-to-let market who may already have been disappointed that Chancellor did not reverse his predecessor’s controversial decision to introduce a substantial 3% surcharge on stamp duty (SDLT) the purchase of second homes and investment property will be interested to see the implications of the abolishment of lettings fee as seen by property experts.
Robin Paterson, joint chairman and CEO of United Kingdom Sotheby’s International Realty: “Banning lettings agent fees will have exactly the opposite effect the Chancellor wants. These changes will have little impact on the top end of the market in prime ventral London (PCL) and a significantly negative impact in the middle and bottom end. What the Chancellor should have proposed was more regulation in this part of the industry, rather than simply passing the cost from one party to another.”
Glynis Frew, managing director of Hunters Property plc: “We are very disappointed by the announcement this morning with regard to banning lettings agent fees. An outright ban would have unintended consequences on the very people the government wants to protect perhaps financially or even in terms of property safety. Agents perform both a service and a paralegal role when assisting tenants to move home. Unfortunately, it is very likely rents will increase in response to these changes. Whilst helping first-time buyers onto the housing ladder is important, the government has overlooked the fact that some people genuinely want to rent or have short-term plans.”
Chloe Marienbach, UK manager of online flatsharing marketplace, Weroom.com: “Philip Hammond’s announcement to ban letting agent fees for tenants in today’s Autumn Statement is a step in the right direction for the rental market and its current state. This announcement proves to us that the government is making the necessary changes to support the large proportion of the UK that are renting and are not in a position to buy a home, or are simply choosing to rent long-term.”
Nick Leeming, chairman at Jackson-Stops & Staff: “While the announcement of the abolishment of lettings fees appears to be good news for renters, experience shows that any savings to the tenant will likely be passed on to the landlord who in turn could then pass them back on to the tenant through increased rent as they seek to cover their costs. This legislation is short sighted and is yet a further challenge to landlords who have faced a barrage of increased costs over recent months, including the additional 3% SDLT levied when they purchase a rental property and also the abolishment of mortgage interest rate relief which is set to commence in April next year.”
Rob Ellice, easyProperty's CEO: “The announcement… is a welcomed decision. By removing these costs, a fairer playing field will be created for the UK's 4.3million private renters. Any sensible agency won't pass on the charges to landlords, due to competition in the sector, so we don't foresee rent rises as there is no need to add the fees to rents. Having the government step in to abolish these fees is another example that the industry cannot self-regulate and be fair to consumers. The greed of a few has cost the many as it’s a minority who have charged excessive fees rather than the majority of agents.
John Eastgate, sales and marketing director of OneSavings Bank: “Letting fees have inflated beyond reason in certain parts of the country, so scrapping them has all the markings of a good policy. However, renters will inevitably pay for the further cost on landlords through increased rents, so it's hard not to see the move as two steps forward, one step back for housing policy.”
Nick Davies, head of residential development at Stirling Ackroyd: “The reality of the government’s decision to ban letting fees is that it will only result in landlords passing the bill on to tenants through higher rents. Landlords have already been stung by the stamp duty surcharge and the end of mortgage tax relief, and so it is difficult to see them doing anything other than push the burden back on to Generation Rent. Hitting landlords with extra costs only leads to fewer properties available to rent in the longer term, meaning even greater competition and higher rents. The only solution to the housing shortage is to build more homes and free up public sector land for housebuilding.”
Sarah Bush, director, Cheffins Residential Lettings: “The government needs to focus on the regulation of agents rather than banning up-front fees in their entirety. The banning of fees across the board will ensure that the costs are passed directly to the landlord, who in turn will increase rental prices to cover their respective costs. A prohibition by the government on fees, combined with mortgage interest relief, will stifle a housing market that is already at breaking point and landlords are likely to leave the private rental sector en-masse.”
James Davis, CEO and founder of national online lettings agency, Upad: “It shouldn’t be a surprise that the Chancellor has today announced that it is banning letting agent’s fees, but I think the industry is still shocked. Ultimately, market forces haven’t prevailed in all of this. Foxtons put their tenant’s fees up by £50 every couple of years and it is purely to increase their profits, whilst other high street lettings agents ludicrously charge over £300 simply to press print on an identical tenancy agreement to renew for the following year. Long=-suffering tenants (as the government has coined JAMs – Just About Managing) have no choice but to pay it as renting is a necessity; it is not like if a shop put up its prices and the amount it sold would go down.
Kate Eales, national head of lettings at Strutt & Parker: “A cap on letting agent fees has been mooted for some time but we are quite surprised by today’s announcement of a full ban on fees to tenants as soon as possible. This will be welcome news to long-term renters and will go a long way to driving up standards and service in the lettings industry by forcing rogue agencies who exploit tenants by charging very high upfront fees out of the marketplace.”
Paul Smith, CEO of haart estate agents: “Today’s news of a ban in letting agent’s upfront fees is yet another unwelcome and haphazard government intervention in the rental market, which will sadly only lead to a backdoor rent rise for tenants. This measure represents yet another government blow for landlords, following the 3% stamp duty surcharge on second homes, the end of mortgage relief and the new rules on lending relative to rental income that have already come from the government in the last year.”
Michelle Niziol, director of IMS Property Group: “There is no ‘one size fits all’ solution to the issue and whilst as a regulated lettings agency we welcome and encourage improvement and regulation in the sector, today’s announcement by the Chancellor to ban the charging of tenant fees is unnecessary legislation that will inhibit rather than benefit tenants renting in the UK.”
John Goodall, CEO and co-founder of peer-to-peer platform Landbay: “It’s encouraging to see signs of a government finally recognising the importance of the private rented sector, after a flurry of tax hikes left in Osborne’s legacy, but it’s hard to know whether a ban on letting charges will be good news for tenants in the long run. Landlords will have little choice but to absorb letting agent fees themselves and, in time, will pass these on to tenants. Scotland has already gone down this route, removing the fees back in 2012, and although there are a lot of moving parts in play here, it saw rents grow by 1.55% over the past 12 months, the fastest growth of all of the UK Home Nations*.
John Midgley, managing director, Touchstone: “Government has created a crowd-pleaser, but this will cause uncertainty and confusion in the lettings industry, most of whom charge reasonable fees and recognise that the cost of entry into a rented property needs to be fair and transparent. The Chancellor seems to have jumped on the bandwagon which presumes that tenant fees are income which simply improves an agent's profits. This is simply untrue. It’s too early to say, but more importantly, it is likely to make would-be landlords, whether private individuals, or corporate investors, think again about entering the market, at a time when they are sorely needed as part of the solution to the country's housing crisis.”
Jeff Doble, chief executive of Dexters estate agents: “Whilst we await the exact detail of the legislation we broadly welcome the government's action on this. We would prefer to see compulsory regulation of letting agents but this is a step in the right direction, as it will lead to more transparency and make life difficult for rogue estate agents."
Andrew Ellinas, director, Sandfords: “The news that the government is banning letting agents fees to tenants as soon as possible and that landlords should meet those fees, has left me struggling to see how that's fair. Granted there are some letting agents charging unreasonable fees, but on the whole tenants have simply been paying for a service required in order to rent a property. The devil will be in the detail, but it would seem that this is the latest move to hit landlords who are now facing increased costs.”
Lisa Simon, head of lettings, Carter Jonas: “The Autumn Statement is set to exert further pressure on landlords. With lettings agents shortly to be banned from charging fees to tenants, yet an unwavering £200 average cost attached to the start of every tenancy to ensure the property is ready for market and meets the heavy statutory requirements now in place for letting, landlords will inevitably bear the additional fees. This is set to exacerbate the current plight of the buy-to-let market.”
Mark Johnson, The University of Law: “Letting agents and their landlord clients will have contractual arrangements in place so they will not be able to change their fees and charging structures unilaterally. It may mean therefore that letting agents bear the brunt of this at the outset until they can terminate and renegotiate contracts with landlords.”
Julian Goddard, partner and head of residential at Daniel Watney LLP: “The additional stamp duty and cuts to mortgage relief are here to stay it seems, despite evidence it is squeezing the supply of new rental homes at a time when demand for private rented accommodation is growing massively. Far from being a way for reputable lettings agents to rip off renters, fees cover the time and costs it takes to process a tenancy, which is becoming increasingly burdensome as the government seeks to layer on new requirements and regulations. The end result is likely the losses incurred by the banning of fees will be recovered through other means rather than yielding tenants any savings."