Don’t stop at payday lenders

Earlier this week the Treasury showed that it’s now entered the debate on how to help families feeling the squeeze.

George Osborne’s announcement that the government will act to curb the predatory and exploitative actions of the payday lenders will help people struggling to make ends meet, but the Treasury shouldn’t stop there. The colossal interest rates of payday lenders stands out, but the financial hardship caused by other unjust charges must also be addressed.

One industry in need of the treasury’s focus is the lettings market – with its sky-high opaque charges and an absence of any enforced industry-wide standards. Renters and landlords are losing out. They are being doubled charged for the same services, and when a letting agency goes under there are minimal protections in place to ensure client money is kept safe.

As we reported last week our helpline is expecting an alarming rise in calls, and 80,000 children will wake up homeless this Christmas. Previous research we commissioned showed nearly a million people were relying on credit to pay their housing costs, many of whom will have come to Shelter seeking advice or support. Families across the country are struggling to stretch their budgets to cover rising rents, mortgage payments and they face increasing household bills at a time of stagnating wages and potential gaps left by unemployment and changes to welfare.

Many of these families will be renting. Renters like Rachel who we featured on our blog this week, a working mum with a young baby who was forced to move home three times in 15 months. Rachel had to take out several loans to cover all the letting agency fees she was charged, along with the other start-up costs involved with moving.

Rachel, like so many, had no choice whether to pay the fees or not – she had to secure a stable home for herself and her new-born child. The government have said that making fees transparent will mean renters can shop around and this will drive down costs. But when there are more renters than properties and tons of desperate people all chasing a limited number of decent, affordable and safe homes, then we need to offer renters more.

This week the government laid down a small piece of legislation intended to give renters using letting agencies a right to complain when something goes wrong. This is an important first step and one we fought hard to secure. But this reform isn’t the panacea some are claiming. The lettings industry isn’t renowned for cleaning up its own act and even some within the industry call it ‘the wild west’. Despite a recent ruling that all letting agencies have to disclose their fees upfront in all adverts we’ve seen cases where this is being ignored.

Tackling the lettings market won’t fix private renting overnight, as capping payday lenders won’t eradicate the debts faced by millions of households. Yet the Treasury could take a simple step, follow in the footsteps of Scotland, and end letting fees to renters. This could help alleviate some of the most unpredictable costs associated with renting – costs which lead 27% of renters using a letting agency to borrow or use a loan.

This would be a popular move. Two thirds (66%) of those with a recent experience of renting through a letting agency would support a ban on upfront fees. So as the Treasury go forth and continue to look at other ways to help Britain’s families, this should be on the menu of options.

You can see more about Shelter’s campaign to end letting fees here.

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