Letting fee changes

Letting fee changes

Landlords are charging tenants hundreds of pounds via agencies to cover so called administration costs are to be offered relief by the chancellor who aims to ban letting fees.

Following a parliamentary consultation the ban looks set to come into force
Letting is highly profitable for agencies with tenants being charged exorbitant rates for credit checks, renewal fees, along with many other services for miscellaneous administration work.

Since 2012 letting fees have been banned in Scotland, the tenant now pays just the rent and deposit, all other fees are met by the landlord. The argument put forward by the letting association is that rent will need to rise to cover the fees, and therefore the tenants will not benefit and could be worse off.

The evidence seems to contradict this stance in Scotland the research, undertaken by shelter, shows that landlords acted in a very similar way to those in the rest of the UK. Landlords were largely positive about the change and only 1% - 2% of rent rises were said to be caused by the outlaw of fees, and shelter concluded that letting fees should be banned elsewhere.

Despite the findings by shelter the Scottish landlords association are against the ban and believe the ban on letting fees has been transferred into higher rents.
So we can only conclude that the findings are inconclusive.

There is an argument that the Scottish model shows transparency of costs, and when you are living on a hand to mouth existence a fee of £300+ can be financially devastating.

The ban will be a ‘u-turn’ for the Conservative Party who, only six months ago, resisted calls from the Labour Party saying that the measure will lead to higher rents, the most likely scenario for the fees is that the agencies will push the costs back onto the landlords, who are already being hit by the changes in tax law on their business costs.

Being a landlord is a business and any restrictions on profit may force a change in a landlord’s business model- this could be higher fees, finding savings elsewhere or diversification. We need a rental option in the housing market and with the cost of property so high and interest rates likely to rise over the coming years, it will be harder for buyers to find a property of their own.

Yes, we need to ensure agencies and landlords are not taking advantage of the market but at the same time the business of being a landlord needs to be profitable, when you factor in property price rises and low interest rates for most landlords it is profitable, however when interest rates rise and the market stagnates it may not be the same story.

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