Ban on letting agency fees is good news for tenants
CIH policy and practice officer David Pipe says whilst there are concerns that the letting agency fees ban will simply lead to higher rents, the evidence from Scotland does not entirely bear this out.
This weekend saw the introduction of the long-awaited ban on letting agent fees. Across England, agents are now no longer able to charge tenants fees to cover the cost of things like administration and reference checks. Refundable holding deposits are also now capped at one weeks’ rent and security deposits at five weeks’.
The ban, first announced back in November 2016, finally took effect on Saturday (1 June) and follows similar changes in Scotland, where fees have been banned since 2012. Wales is also likely to follow suit by introducing a similar ban later in the year. This is undoubtedly good news for renters.
The government’s research suggested that fees were typically somewhere between £200 and £300 per tenancy but with charges varying substantially between agents, it was clear that some tenants were having to pay much, much more than this. Fees were also opaque. Despite agents being legally required to publish details of them, there was evidence that many agents were still frequently charging fees well above the level needed to cover their costs and were sometimes also ‘double charging’ (i.e. charging both tenants and landlords for the same thing).
Of course, there are concerns that the ban will simply lead to higher rents, but the evidence from Scotland does not entirely bear this out. It is difficult to be definitive here as there are many factors affecting rent levels, and so it is hard to directly attribute any change in rents to a specific policy change. However, where attempts have been made to properly evaluate the ban’s impact, these have generally concluded that any rent increases have been relatively modest.
Even if rents do increase slightly, I would argue that a ban will still help to make the cost of renting more transparent and more affordable, by reducing up-front costs and instead spreading them over the lifetime of the tenancy.
So the ban on fees is certainly something to celebrate. However, we should remember that it is only one part of a wider package of reform that is needed to improve private renting. Government has made several further announcements in this area, including plans to:
- abolish so called ‘no fault evictions’, effectively giving renters an open-ended tenancy that landlords can only ever end in specific circumstances
- regulate letting agents, including creating a new requirement that all agents obtain a recognised qualification
- create a specialist housing court, to ensure that legal disputes between landlords and tenants can be resolved more quickly and by specialist judges with a detailed knowledge of housing law.
These are also all very welcome proposals but, as with the fees ban, it has taken a long time for government to convert a broad statement of intent into tangible policy change. Much of the detail of these measures is still to be determined and with a change of Prime Minister (and perhaps also a change of both Secretary of State and Minister for Housing) now imminent, there is of course a worry that these plans could be watered down or cancelled entirely if the new leadership is not committed to them.
That would be a real shame. Over the last few years government has been making slow, but nonetheless very real, progress in reforming private renting. The tenant fees ban is perhaps the most significant reform to come from this yet. Let’s hope that, whatever the result of the Conservative leadership election, there are still more changes worth celebrating to come.