industry news
Disappointment for landlords
The Autumn Statement was seen as a disappointing day for landlords and a missed opportunity to galvanise the private rented sector into action. There was bad news on three fronts – lettings fees, tax rises and stamp duty. The headlines were grabbed by Chancellor
of the Exchequer Philip Hammond’s announcement to ban letting agent fees paid by tenants. This was described as “yet another blow to the private rented sector” with commentators saying the ban would inevitably lead to rent increases.
“There was bad news on three fronts in the Autumn Statement – lettings fees, tax rises and stamp duty”
The measure was accompanied by unwelcome news that the tax on insurance premiums is to go up by two per cent. Landlords face the prospect of absorbing the extra costs or passing them on to their tenants. But worse was to come when the
Chancellor said the Government will review the way incorporated businesses are taxed. Thousands of private landlords decided to incorporate their businesses after last years’ Mortgage Interest Relief announcement in a bid to reduce their tax liability. The Chancellor’s decision to ignore the
opportunity to look at Mortgage Interest Relief was also a big disappointment. There were also no changes to the Stamp
Duty surcharge introduced by Hammond’s predecessor George Osborne, which saw a hefty three per cent added to the cost of property purchases from April and which fuelled a mini boom in house prices as buyers rushed to complete purchases in February and March last year.
Sector underwhelmed by scrapping of lettings fees
deliver significant support from landlords, tenants or lettings agents. The move was seen as one of the major
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initiatives in the Autumn Statement, designed to demonstrate the Government’s support for private sector tenants living on limited incomes and having to frequently move. Phillip Hammond said by banning letting
agents from charging fees for simple actions, such as producing a tenancy agreement, he expected to save tenants at least £223 every time they changed or renewed their tenancy. But most commentators expect any savings to be reversed with rents increased to compensate agents and landlords for any lost fees. One of the few organisations to welcome
the banning of fees was homeless charity Shelter, whose chief executive said he thought the move would make a huge difference to people struggling to afford fees.
Unfair
Campbell Robb 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. We’ve long been campaigning on this issue and it’s great to see that the government has taken note.” But David Cox, managing director of the
Association of Residential Letting Agents (ARLA) has branded the move as draconian, with the potential for damaging the private rented sector.
he Chancellor hailed it as a bold move to help hard pressed families, but the banning of lettings fees has failed to
“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. All of the implications need to be taken into account.”
Profit
Cox added: “Most letting agents do not profit from fees. Our research shows that the average fee charged by ARLA licensed agents is £202 per tenant, which we think is fair, reasonable and far from exploitative for the service tenants receive. “These costs enable agents to carry out
various critical checks on tenants before letting a property. If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents.” The National Approved Letting Scheme
(NALS) said the Chancellor’s decision had taken the industry by surprise – and that it would continue its work to investigate alternatives to an outright ban. Chief Executive, Isobel Thomson, said: “Given
the rhetoric around excessive letting agent fees, the announcement was perhaps of little surprise. We don’t believe banning fees is the answer. The majority of letting agents fees are fair and reasonable and charged for the service they provide.”
Clarity
She added: “Unfortunately, by banning, many of these fees will still be passed on, but in other ways. It will not give give renters ‘greater clarity and control over what they will pay’ as suggested by the Chancellor. “While others have been burying their head
in the sand, NALS has been working with the lettings industry to create a solution on upfront letting agent fees through the Fair Fees Forum. We are offering the expertise of the Forum to Government as they consult on bringing forward legislation.” A similar step was taken in Scotland back in
2012 and now tenants north of the border can only be asked for the rent and a deposit – everything else has to be paid by the landlord. Shelter found that landlords in Scotland
were no more likely to have increased rents after the ban came into force than landlords elsewhere in the UK. But Scottish letting agent groups disagree, arguing that rents rose when fees were banned. A House of Commons select committee decided the evidence was inconclusive. The Government is yet to release further details of the proposed letting fees ban.
6 | HMM January 2017 |
www.housingmmonline.co.uk
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