Managing Director, ARLA
Yesterday I met with the Department for Communities and Local Government (DCLG) to provide them with the results from December’s members’ research into tenant fees along with a policy paper outlining ARLA’s view on how best to practically implement the proposed ban on tenant fees in England.
The meeting, with the officials who are creating the consultation, was frank and productive and I reiterated our proposal for fees to be spread over the first six months of a tenancy.
Today, we are presenting evidence to support a ban on upfront fees but opposing a full fee ban and the unintended consequences which that action would bring.
New ARLA research, from you our members, highlights the impact a full ban will have on tenants, letting agents and the wider housing market. This has been issued alongside a new policy paper, which reveals that more than four out of ten (42 per cent) letting agents expect that a full ban will result in reduced staff numbers in the medium to long term, while 62 per cent of agents think that a full ban will cause the quality of rental properties to decline.
The research was based on responses from 1008 members and examined the purpose of letting agent fees, which cover a broad range of tasks, checks and legal requirements including conducting credit checks and collecting references which can take up to eight hours on average. Thank you to all those who responded.
WHAT ARE THE BENEFITS OF SPREADING THE COST OF FEES OVER A YEAR?
From our research, letting agents expect the condition of properties to worsen, and three in five (61 per cent) also expect property management standards to drop. By spreading the cost of fees, rather than banning them entirely, letting agents will be able to maintain current service levels to tenants.
The spreading of costs for vital services will also make tenancies more affordable to tenants, as it means they will only need to find the deposit and the first month’s rent.
Crucially, under ARLA’s proposals, tenants would only pay for costs for vital services over the first six months of a tenancy, rather than subsequent years; meaning that there would be no additional cost for renewing a contract.
KEEPING COSTS DOWN FOR LANDLORDS
Spreading the costs for these services will mean that landlords will also not face higher charges at a time when they are already facing much tighter levels of regulation and dramatic rises in tax. ARLA’s research shows that letting agents overwhelmingly expect rents to rise if a full ban comes into force, as agents, who need to recoup the costs incurred in undertaking the important work that fees currently cover, pass these onto landlords.
IMPACT ON JOBS
Finally, ARLA’s research found that letting agents believe that over four in ten members think that a full ban will mean that staff numbers will reduce in the medium to long term. By spreading costs for essential services, jobs in the letting agency sector will be saved, preventing a negative impact on the wider economy. Fees also provide a valuable source of revenue to the Exchequer in VAT receipts, which will be retained by ARLA’s proposal.
When the Chancellor announced a full ban on letting agent fees in the Autumn Statement, we called the measure draconian and a crowd-pleaser. We stand by that. Nonetheless, we believe that ARLA’s proposal to spread the cost of services across the first six months of the tenancy will guard against the numerous unintended consequences of a full ban while also finding a solution that works best for the consumer.
Over the coming weeks and months, ARLA will be campaigning for a balanced legislative solution. Our research supports our previous calls that a full ban on letting agent fees will have a profoundly negative impact on the rental market, and do little to help cash-poor renters save enough to get on the housing ladder.