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Lettings fees ban: The lobbyists push back

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Although the ban on tenant fees from lettings agents was hailed by many as a positive step forward for renters, the industry lobbies are gearing up to fight back against the proposals. Jenny Stringer, one of the Cable Media Lab participants finds out more.

As generations of renters emerge who don’t see homeownership as an achievable goal, it’s crucial to at least have a private rental market that’s fit for purpose. Theresa May’s announcement in the belated Queen’s Speech last week, that “proposals will be brought forward to ban unfair tenant fees” seems like a move in the right direction.

However, letting agents are on the defensive with last ditch efforts to influence the ban, joining forces under the leadership of ARLA (Association of Residential Letting Agents) to form vocal lobby groups.

Bristol, in line with the rest of England, continues to see the private rented sector grow, with an estimated 40% of housing in Easton rented privately – and not just among the under-30s, but across all age groups. With rents already sky high – a one bed flat in Bristol hard to find for less than £600/700pcm – additional agency fees could price many people out of renting in the city completely.

For once, the government is in agreement. Responses from the government consultation on letting fees, which ended this month, are still being sifted through. Housing rights groups organised a series of direct actions and the letting agent lobby at one stage trying to get the consultation suspended during the election campaign. ARLA said the moves were an assault to the sector and a “draconian measure, (that) will have a profoundly negative impact on the rental market”.

Cross-party support

Every political party contained the ban in their manifesto so attempts to frame the issue as a “headline grabbing knee-jerk reaction from a new government trying to do anything to gain public support”, as stated by the MD of one letting agency, has little traction. The NLA (National Landlords Association) assessment that it’s a Conservative tactic to win back votes seems a desperate attempt from the lobby to undermine the Tenants Fee Bill, which is expected to go through next year.

Housing charity Shelter has been calling for a ban on letting fees since 2013, and are joined by a multitude of voices from the sector, including Citizens Advice. Tenants’ rights campaign  Generation Rent set up a comparison website for letting fees: Letting Fees UK.

The fee ban’s impact will have wider repercussions for tenants than just extra money in their bank accounts: A ban on letting fees will change the balance of power and rather than ‘shut up and put up’ with poor conditions, tenants will be better placed to challenge landlords and have more freedom to move out. It will bring some much needed stability to the sector too as the incentive will be removed to issue short six-month tenancies, as is currently the case, with every new set of tenants bringing a payday of new fees.

Unwilling to entertain the idea of reduced profits, letting agents warn it’ll be the tenants left to make up the shortfall through increased rents.

The RLA (Resident Landlord Association) has conceded: “It is clear that the government is determined to see a ban in place. The exact mechanism and scope of that ban is something that will be hotly debated.” The consultation process being more about how the policy will be shaped, the current expectation is that local authorities will enforce it via trading standards.

ARLA states on its website they found the average fee a tenant has to pay is a ‘reasonable’ £202. The Cable called several Bristol-based letting agents whose fees all hovered around the £360 mark. This is non-refundable and in addition to a month’s rent up front and a deposit equivalent to, on average, six weeks rent.

Although since 2015 letting agents have to display fees on their website, it’s still not clear how they arrive at the figures they do. Referencing charges for tenants, for example, can be anything between £75 – £120. A quick Google search lists a range of tenant referencing companies, including a service offered by the NLA, that carry out checks for as little as £15 per tenant.

As is often the case, things are even more expensive for those unemployed or on low wages – with some agencies charging an extra £120 if the tenant has to use a guarantor. From personal experience of working in the sector – a significant percentage of the fee is commission – key to any sales role.

Landlords going rogue?

Credit: Jenny Stringer

Campaigners argue costs should be met by the landlord. Chancellor Philip Hammond agrees: “Landlords appoint letting agents so landlords should meet their fee.”

Currently, in a bid to win their business, free management services are often offered to landlords but with a ban in place, and agencies determined to maintain their profit margin, landlords will be expected to make up the shortfall. They argue this will be passed onto tenants through increased rents, and have gone so far to suggest it might price the most vulnerable renters out of the private rented sector all together.

With an air of fear mongering a group of Yorkshire letting agents have put forward an alternative proposal. They warn of a potential ‘wild west’ scenario where landlords go rogue, rather than enlisting letting agents to manage their properties going ‘underground.’ They add landlords may choose to sell up rather than meet additional costs, adding to an already critical housing shortage.

In their proposal for every rental transaction the agent pays current tenancy deposit schemes a levy of £15 – £25 – but when you compare this to tenant fees it’s clear who’s going to remain better off by their new model. Crucially, they feel the rental system is not broken – many Bristol renters would disagree.

ACORN, a tenant rights union founded in Bristol, organised a demonstration on 20 May to draw attention to the issue. Nick Ballard of ACORN said in response to the lobby:

“Anything less than an outright ban on fees charged to tenants is a cop out. Letting agents don’t work for us so we shouldn’t be paying them. That’s the end of it as far as I’m concerned. If they want to increase regulation of the sector, then that’s fine but there are other ways to do it. Tenants shouldn’t pay for their own protections!”

Watch this space for any further developments. If you are a private renter in need of housing advice you can get in touch with CHAS, Shelter and consider joining ACORN.

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