If there’s one thing sure to get estate agents’ knickers in a twist, it’s a threat to their income.
And so the news that Philip Hammond will use the Autumn Statement to announce a ban on letting fees has sparked a tirade of protestations and a bumper crop of press releases lamenting their lot.
But letting agent fees have been a thorn in the side of renters for some time. Young people in particular complain that charges, such as £420 to change the name on a tenancy agreement and £330 to set up a tenancy, hamper their efforts to save for house deposit. But it’s not just the young who feel that these fees are unjust: last month more than a quarter of a million people signed a petition that was delivered to Downing Street demanding that the charges be banned.
In an age when financial services companies are being urged to make transactions as transparent as possible, the lettings industry remains frustratingly opaque. Renters often find themselves with a slew of unexpected charges after they’ve signed on the dotted line.
A recent survey by Urban.co.uk found that letting fees can top £1,000 and include a range of nefarious charges, not least £90 extra to move in on a Saturday and £5 for a photocopy of the tenancy agreement, regardless of whether the tenant requests a copy. Just picking up the keys can cost £7.50.
Nevertheless, the doom-mongering from the lettings industry has already begun. ‘Experience shows that any savings to the tenant will likely be passed on to the landlord who in turn could then pass them back on to the tenant through increased rent as they seek to cover their costs,’ says Jackson-Stops & Staff, a – you’ve guessed it – property agent.
Then there’s this. ‘A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market. It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder. This decision is a crowd-pleaser, which will not help renters in the long-term.’ And who put out this statement? The Association of Residential Lettings Agents. It added: ‘If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents.’
There is absolutely no evidence that this will happen. The measures haven’t even been officially announced yet – anything said at this point is pure conjecture. In fact, let’s look at the Scottish example. Letting fees have been banned in Scotland since 2012. That’s four years during which – despite fears that the ban would cause agents to pass on the cost to landlords, and from there to renters – there has been no suggestion of across-the-board increases in charges to landlords.
What is beyond doubt is this: there is a housing crisis in the UK. On average, house prices are now almost seven times people’s incomes. More than nine million people live in private rented accommodation, including almost 1.3 million families with children. Add exorbitant letting agent fees into the toxic mix of soaring rents, eviction worries and the fact that one third of private rented homes in England fail the meet the Decent Homes Standard, and it’s clear that the Government has to do something – and do it quick.
Not surprisingly, charities have welcomed the Chancellor’s announcement on lettings fees. Campbell Robb, chief executive of Shelter, said: ‘Millions of renters in England have felt the financial strain of unfair letting agent fees for far too long, so we’re delighted with the Government’s decision to ban them.
‘Our recent survey found that nearly half of renters had been asked to pay fees that they thought were too high, with many having to borrow money every time they move, so this will make a huge difference to all those scraping by in our expensive, unstable renting market.’
So, congrats to the Government for taking this necessary step. But before you give Philip Hammond a standing ovation, it’s worth bearing in mind that, in effect, the policy has been lifted from the Labour Party’s manifesto from last year’s general election.
When Ed Miliband first mooted this measure, the Tories pooh-poohed it. As recently as September, the housing minister Gavin Barwell said that it was a ‘bad idea’ and ‘landlords would pass cost to tenants via rent’. This raises the prospect that a headline-grabbing move may not be all it’s cracked up to be. As they say, the devil will be in the detail.
Helen Nugent is Online Money Editor of The Spectator