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Mixed Reception for Tenant Fees Ban

The Tenant Fees Act 2019 came into effect on the 1st June. Now, nearly two months in, we look at the changes it has already introduced and see what they industry is saying. Signed into law last year, the government felt some agencies were charging ridiculous sums purely to profiteer. There was a feeling that some were making it up as they go along. The decision was made for a blanket ban to much protests from landlords about also banning legitimate and reasonable fees.

 

Have Rents Increased as Warned?

When any government introduces measures to protect consumers, price rises may follow in some cases. The letting fees ban came with stark warnings from the industry about such a ban becoming counter-productive. The industry posited that the ban would increase rents for tenants. Inevitably, letting agents began passing those lost costs from fees onto landlords. In turn, property owners increased rents to cover their increased costs.

The tenant fee ban also covers landlords’ previous charges for inventory checks and supplementary costs for pet damage. These things too are already impacting rents, according to reports from the RLA, PRS and ARLA. Most state that 45% of tenants whose contracts came up saw rent hikes between June and July.

 

Other Bad News

Not great news for the industry, but the report demonstrated that the departure of long-term property investors continued. The private rental sector reports fewer landlords, with agents acknowledging this fact too. But the figure is nowhere near as many as predicted. The departures are a trickle rather than a flood.

A spokesperson for ARLA said that the rent increases are the highest on record, driven almost entirely by the lettings fees ban. This will continue for some time, likely into next year. Tenants can expect to feel the pinch as we enter the period which is expected to be the immediate aftermath of Brexit, should that happen.

 

But It’s Not All Bad News

It’s a strange time as far as the industry is concerned. The money lost previously raised from fees have gone on rents, but there is no sign of a slowdown in rent demand. Available property for rent numbers dropped to 201 per RLA member. This means more properties are being rented out. This is reflected in the demand for rental property from prospective tenants.

Rent demands are slower though. In May, it was reported that the number of tenants negotiating a rent reduction successfully, dropped from around 1.9% in April down to 1.5% in May. The last time the figure was this low was January 2016.

The short-term effect is price rises, but some believe that it is the model that is problematic. By shifting to new ways of promotion and administration, both landlords and tenants can benefit with lower costs and lower rents.