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Fees ban consultation was just “tick box exercise” says ARLA

Disappointed David Cox says Queen's Speech proves government hasn't listened to industry as capped deposits are revealed.

The Queen’s Speech today contained a promise to introduce a letting fees ban for both agents and landlords and “promote fairness and transparency in the housing market”.

But in a surprise move, the government also revealed that it is to cap deposits at one week’s rent, rather than the six weeks’ rent that is most common within the sector at the moment.

But the measures announced in the Queen’s Speech have been criticised by ARLA Propertymark, which describes them as “disappointing”.

David Cox, ARLA, image“It’s unlikely the Government had enough time to analyse all of the responses from the consultation, as it only closed 12 working days ago, on the 2nd June,” says David Cox, its Chief Executive (pictured, left).

“It appears they had already made their decision and therefore the consultation was no more than a ‘tick box’ exercise and they haven’t appropriately taken the industry’s views into account.

“A ban on letting agent fees will cost the sector jobs, make buy-to-let investment even less attractive, and ultimately result in the costs being passed on to tenants.”

David also believes that, given the amount of work letting agents put into preparing tenancies and managing properties, it is “only right and proportionate that the industry is recompensed for this work, which benefits tenants”, he says.

4,000 jobs

Research by ARLA also reveals how hight the stakes are for letting agents. It says that the fees ban is likely to see the industry lose £200m in turnover and 4,000 jobs, while landlords are likely to lose £300 million in lost revenue.

“On average, rent costs will go up by £103 per tenant, per year, ultimately meaning tenants who move more frequently will reap savings on their overall costs but longer-term tenants, who are usually lower income families, will see a loss as their rents rise year-on-year,” says David.

“The ban contradicts the Government’s stated aim to encourage longer term tenancies, as tenants who stay in their homes for the long-term will end up shouldering the costs of those who move more frequently.”

Detriment of tenants

But some industry view the ban as an output of over-charging by some letting agents in the past. Lucy Morton (pictured, right) a former president of ARLA, says that fees charged by agents in the past should have been “only to cover reasonable administration and referencing costs” and not, as some agents have done, as “for their gain and to the detriment of tenants”.

“So the government has now acted and banned letting agents from making these charges,” she says.

Political gesture

richard lambert rlaRichard Lambert, CEO of the National Landlords Association (pictured, left), says: “The decision to cap tenancy deposits at no more than one month’s rent smacks of a political gesture from a government desperate to court the voters who supported their opponents at the last general election.

“We estimate that around 40 per cent of deposits exceed one month’s rent. Whilst capping them may reduce the move-in costs for some, it will increase the temptation for others to view the deposit as the last month’s rent, leaving landlords out of pocket at the end of the tenancy if, for example, the property has been damaged.

“Some landlords use a higher deposit to give them the extra confidence they need when letting to higher risk tenants, so this could also have the unintended consequence of deterring them from offering their property to those likely to be struggling with affordability in the first place”.

Rents may rise

“The volume of buy to let mortgage approvals has halved since the stamp duty changes last March,” says Anthony Codling, an equity analyst and City investment firm Jefferies.

“It appears that many landlords financial returns were finely balanced. There is a risk, therefore, that the supply of rental properties constricts if those landlords close to the edge of solvency are pushed over the edge (or pushed too close to the edge for comfort) by the additional costs of supplying rental properties to the market and seek to exit the market. If supply falls, it is likely that rents may rise.”

Market in limbo

Alan Ward RLA image“A Draft Bill serves neither tenants nor landlords, and leaves the market in a state of unhelpful limbo,” says Alan Ward, Chairman of the Residential Landlords Association.

“Rather than proceeding with draft plans that will be eclipsed by battles over Brexit, Ministers could instead use powers they already have to introduce a fixed menu of fees which letting agents would have to publish. This would enable tenants to immediately understand fee structures, and enable them to more easily shop around.”






June 21, 2017

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