What would a Labour government mean for letting agents?

It now seems almost certain that we will elect a Labour government on 4th July. So, what will this mean for letting agents? Well, this depends on the size of their victory and the type of Labour government that we get.

If the election is a landslide our new government will have much more confidence to take what they will describe as “bold decisions” and the chances of extreme legislation will be greatly increased. If their majority is smaller, they will behave more cautiously.

Hopeful signs

With regard to the type of Labour government, we have to hope that it will be a moderate Blair-style government rather than an extreme Callaghan-style government who introduced 98% tax rates and almost drove the country into bankruptcy.

The signs so far are quite hopeful. Labour has been deliberately vague about the policies it will introduce once it gets into power but the signs are that the extreme left-wing element of the party will be kept under tight control.

The signs are that the extreme left-wing element of the party will be kept under tight control.”

Taking this into account I do not expect any extreme anti-landlord or anti-agent policies to be brought in immediately and I think both landlords and agents will give the new government the benefit of the doubt.

This is most certainly how the buyers of letting agencies are seeing things. After Lehman Brothers we lost every sale in our pipeline the following week. The same thing happened the week after the Brexit referendum vote. However, so far the sudden election announcement has had no impact on us at all, new businesses are still coming to the market, sales are still being agreed and completed and there has been no impact on the prices that we are achieving.

Manageable regulation changes

There are undoubtedly storm clouds on the horizon but I am confident that the lettings sector will take most of them in their stride. The ending of Section 21 evictions, local authority licensing, increased compliance legislation and enforcement, all these things have a cost to landlords but they are all manageable.

Another important factor that will protect letting agents is the stability of their income stream. In the residential sales market, an external event like the Covid lockdown or a sudden rise in interest rates caused by Liz Truss can mean that fee income stops overnight.

Where changes are introduced, agents will find ways around them.”

The lettings sector doesn’t work like this. Managed lettings agents saw almost no change to their income during lockdown. And when interest rates go up it can take years for the impact to be seen rents because many landlords have no mortgage and many more are on fixed rates.

Where changes are introduced, agents will find ways around them. When the tenant fee ban was introduced, most agents were able to pass on the cost of referencing and set up costs to the landlords who recovered the cost through increased rents.  When some landlords were forced to sell last year due to higher mortgage costs most agents were able to recover their lost income by raising rents and fees on the rest of the portfolio.

Rent controls fear

The one change that I do fear however is rent controls. When I left home in 1979 it was impossible to rent a home privately.  My first home was technically let to me on a bed and breakfast basis.  Breakfast arrived every morning in the form of a box of cornflakes and a pint of milk and this apparently was enough to avoid the legislation.

My second home was technically a company let.  Before we moved in myself and my four housemates all had to become directors of a limited company set up by the landlord.  Lord knows if this would have stood up in court but this was how the tenancy was set up to avoid the rules about rent controls and security of tenure.  The situation was so difficult that I was forced to buy my first home at the age of 21 with a 100% mortgage. It turned out to be a wonderful decision but that is another story.

Landlords’ response

Rent controls have been proven to be an utterly disastrous policy time and time again.  All the evidence is that landlords will respond in one of the following ways:

•   They will sell their property.

•   They will move back into their property.

•   They will turn their property into a holiday let.

•   They will find ways to avoid the rules.

•   They will let their property on the black market.

•   They will increase rents to reflect the increased risk.

These things won’t happen overnight but over a period of time rent controls would totally destroy the UK buy-to-let market. When rent controls were introduced in 1915 90% of properties were rented from private landlords. By the time they were repeated in 1989 only 10% of properties were rented from private landlords.

Please Mr. Starmer…

Please, please Mr. Starmer don’t allow this disastrous policy mistake to be repeated. So long as we avoid rent controls, I am confident that the lettings sector is resilient enough to survive anything else.

Adam Walker is a business sales broker and management consultant who has worked in the property sector for 42 years.