Agency fees to be scrapped.

Several consumer groups welcome the ban on agency letting fees, but the Scottish example indicates that landlords might simply increase rents.

Much has been written in the press about the recent promise by the government to ban agency letting fees. The move, introduced by the chancellor, Philip Hammond, in his 2016 Autumn Financial Statement, aims at helping "jam" (Just About Managing) families, a group for which there is no exact definition: broadly speaking, these are households who struggle financially but do not qualify for housing benefits; typically, according to a BBC article, they have one member of the family in full work and have less than a month's salary in savings. The chancellor's intentions are certainly laudable - helping households who cannot afford to buy a house make ends meet by reducing their renting bills. At the moment (and until the measure is officially enforced) agencies charge tenants and landlords for administrative operations such as credit checks, house inspections, inventories - all operations that somebody has to pay for, since they are not only necessary, but indispensable in ensuring that living in rented accommodation is safe, and that renting arrangements are fair, hassle-free and stress-free for both tenants and landlords.

Some of these fees are currently footed by tenants, with costs summing up to an average £337, although consumer magazine Which? found huge discrepancies in how much agencies charge to tenants, with big groups typically charging far more than independent agents. Citizen Advice, a consumer group, welcomed the ban, claiming that fees went up 60% in the past five years and told the Financial Times that it will be good news for the 4.8m households who now rent from a private landlord - 1.5m of whom are families with children. However, the same article of the Financial Times suggests that, while Jam families should certainly be helped, Hammond's ban, rather than committing the Government to provide this help, simply imposes the burden to landlords and estate agents. The Government is not questioning the actual need of all operations these fees pay for - ensuring the safety of the house, the tenants' ability to pay, the correct deployment of all steps that the law requires in tenancy contracts - but is simply asking that all fees be absorbed by landlords and estate agents; ie, that landlord give up some of their profit to help struggling families, or that all these indispensable operations are carried out for free.

As said, some consumer groups welcomed the news. But the controversial move has attracted at least as many critics as it gained supporters. A very prominent sceptic is Housing Minister Gaving Barwell, who just two months ago tweeted that a ban on fees would be a "bad idea" - although he stopped short of criticizing the move after its introduction. The main problem with the ban is that agencies and landlords have so far heavily relied on those fees to operate a viable business. Agencies typically do not mark-up rental price - meaning, they do not make a profit on the rental price itself, and rely on fees for making a living. While big estate agents are those charging the highest fees, smaller agents who have been found to be fairer will be those feeling the pinch, since bigger chains will be able to absorb the costs better. The consequences of this might be less competition, which will leave tenants worse off. The argument, then, is that landlords should absorb these costs from tenants.

Trouble is, landlords have also been recently hit by a 3% increase in stamp duty on second properties and other tax increases. Second houses are not the precinct of super-rich investors or big groups, but have instead been a safe refuge for small investors and pensioners who look for regular income to support their livelihood. Reducing their margins might drive some of them out of the market, clearing the road for bigger groups who are more equipped to shoulder increased costs - again, creating a more restricted house-renting market. In this case too, the tenants might be worse off. But the main reason why the ban on fees could turn sour, is that landlords might simply increase.


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