Chancellor of the Exchequer, Philip Hammond, delivered his Autumn statement on 23/11/16, in which he announced his intention to ban letting fees charged by agents to tenants.
Tenants are typically charged a range of fees for administration. This includes, but is not limited to; Credit checks, referencing checks, immigration checks and administration costs. The most recent England Housing Survey shows the average tenant costs to agents is £233, however, Shelter dispute this with their 2012 research showing that 1 in 7 tenants pay more than £500.
This change, which is expected to be enforced “as soon as possible”, comes after The Labour Party and Liberal Democrat MP Olly Grender’s campaign against “eye- watering” letting fees. Having been successfully banned in Scotland, the banning of tenant fees is expected to “save 4.3billion households hundreds of pounds”.
Many, who have long campaigned against tenant fees, are delighted by Hammonds promise. Shadow Housing Secretary and Labour MP, John Healey, said that his party had supported “ending sky- high letting fees for renters” for many years. Meanwhile, tenant Natalie Lightman said “banning fees is a good idea as it will drive up competition”.
However, this announcement has triggered a backlash amongst the property industry, with both agents and landlords disputing that these changes will realistically cut costs for tenants and agents such as Foxtons, Savills, and Countrywide, seeing huge falls in company share prices.
Just 6 months ago, the Conservative Party under David Cameron’s leadership resisted calls for change due to due to fears that capping fees to tenants would increase the amount agents charge to landlords, which in- turn would increase monthly rent. Marcus Jones, the Local Government Minister and Conservative MP stated: “Banning or capping letting agent fees would not make renting any cheaper for tenants- tenants would still end up paying but through higher rents”.
David Cox, Managing Director of the Association of Residential Letting Agents (Arla), also believes that these changes will have a negative impact on the rental market, explaining that most letting agents “do not profit” from these fees. Meanwhile, Richard Lambert, chief executive of National Landlords Association, believes Hammond’s announcement “lacks an understanding of how the whole sector works” and agrees that agents will have to charge landlords more, as they “have no other option.”
Philip Hammond is expected to deliver his next announcement regards the matter, outside his new home at No. 11 Downing Street, in the next few days.