Why a ban on letting agent fees would be good news for tenants
29 Sep 2016
At Shelter we believe that tenants shouldn’t be charged up-front fees by letting agents. It’s a stance we took after hearing numerous horror stories from people of sky-high and often baffling charges (£50 furniture rearranging fee anyone?) and coming to the conclusion that this straightforward approach is the only way to inject a little fairness into the lettings market.
The housing minister Gavin Barwell has a different opinion, however, and has dismissed it as a “bad idea”, citing concerns that landlords would pass on costs to tenants anyway via rent.
The minister was taking part in an Inside Housing twitter chat and we’d like to think he’s still open to discussion and hasn’t completely made up his mind. We don’t agree that banning fees would be a bad idea and we also think he’s misunderstood the impact on tenants.
We think banning fees to tenants would help to reduce costs overall.
As letting agents provide a service to landlords by marketing their properties and finding tenants, we think it’s reasonable that their costs should be met by the fees they charge to landlords. To remain competitive they would have to attract landlords by charging a reasonable price for their services, as well as acting professionally.
Landlords have the power to shop around for the best offer and this gives them the ability to question some of the more dubious fees that we know agents charge. This would reduce costs overall.
Unfortunately the current way in which letting agents function instead drives up costs, with too few consumer checks and balances to ensure these are fair and reasonable. While agents have to compete to attract landlords, renters have very little ability to shop around between agents. Our research shows that renters are primarily motivated by finding the property that’s right for them, and look for the right price and location.
Once they’ve found their ideal next home they’re stuck with whichever agent the landlord has appointed. Desperate to secure a home, they have little to no ability to question agents’ fees. Worse, agents are motivated to offer the best offer to landlords so are incentivised to pass as many costs as possible onto tenants. Combined, this drives up fees for tenants.
It’s notable that many landlords aren’t even aware this is how the market operates. Many don’t know their tenants are also paying fees and can be uncomfortable by the discovery of this double charging.
We think that rationalising the market and getting rid of this murky tripartite landlord-tenant-agent relationship would reduce costs and concerns about a possible increase in rent are not necessary. Upfront fees to tenants have already been banned in Scotland and a crackdown on the law in 2012 didn’t increase rents.
In fact our research shows that Scottish landlords were no more likely to increase rents since 2012 than landlords elsewhere in the UK. Better news still, only one landlord out of the 120 surveyed said they had noticed an increase in fees and passed this on to their tenants.
A simple, straightforward ban on fees to tenants is the only way to fix the market and reduce costs. Increased transparency is meaningless when tenants don’t have the power to shop around, and doesn’t address the fundamental problems created by double charging. And proposals for caps are unworkable when agents aren’t able to provide any breakdown of expenses and prove their costs are reasonable.
We have every confidence so far that Mr Barwell understands renters’ frustrations and knows that they’re crying out for change. Banning fees could bring rapid improvements for both renters and tenants and we hope that the next tweet from the minister backs our call to #FixRenting.