Letting agent fees ban will hit long-term tenants the hardest

The government’s proposed ban on letting agent fees will cost tenants who stay in properties the longest hundreds of pounds, new research has revealed.

There are fears that if lettings agent fees are band, landlords will incur higher fees which will then be passed on to tenants.

ARLA Propertymark (Association of Residential Letting Agent) found that 41% of landlords expect they will need to pass on a portion of the inflated cost to tenants, with rents likely being pushed up by £103 on average per year.

If landlords pass on the entire uplift in agents’ fees rent increases could be as much as £275 a year – hitting long-term tenants the hardest.

Based on an average rent increase of £103, those in tenancies 10 years or more will lose out by £755. However, those who move every six months will pocket £4,463 over a 10-year period.

ARLA said that the move could also result in less investment from landlords, further hitting supply and putting more upward pressure on rents as competition between prospective tenants heightens.

In Scotland, letting agent fees were banned in 1984 and officially clarified in the Private Rented Housing Act of 2011. This meant that tenants were only accountable for the rent and deposit, and everything else would be charged to the landlord. However, this has resulted in many agents carrying out less of the tasks they were doing previously. Worryingly, one in four said they no longer do credit checks as standard.

If letting agents take the full hit of the letting agent fee ban, 16,000 jobs could be at risk. Although it is more likely agents will pass on 75% of costs to landlords, resulting in job losses of around 4,000.

With letting agents paying £400 million a year in employee taxes, the Exchequer would also take a hit.

Letting agent activity also supports a huge range of jobs through spending with suppliers, such as maintenance firms and legal firms, which will all be put under pressure if activity falls.

Using government data, ARLA estimates that letting agents spend around £1.4 billion annually on goods and services such as accountancy and legal fees, building supplies and government services. Overall the spending on suppliers supports around 17,000 jobs indirectly across the UK and £1.1 billion of value added.

David Cox, chief executive, ARLA Propertymark, said: “The lettings sector is worth about £4 billion and employs around 58,000 people all over the country. The government’s Autumn Statement announcement that it plans to ban letting agent fees was the third big blow in as many years for agents, and exacerbate the threat to the private rented sector; an increasingly important tenure on which millions of people rely.

“For many tenants, buying a property simply isn’t an option, and they must depend on the private rented sector to provide security, good standards and fundamentally, a home. Our findings show that landlords are likely to raise rents as a result of the ban on fees. Those tenants who move least frequently, which tend to be lower income families, will be worst hit by rent rises. This is ironic and shows that there will be unintended consequences to what, in effect, is a crowd-pleasing, populist policy.”

Impact of letting agent fees ban on tenants