New government bill could save tenants £240m, but London estate agents worry it could spark ‘housing crash’
A new government bill to ban letting fees across England has ignited fierce debate in the property sector, with tenants and real estate agents drawing battle lines on either side.
The government says its Tenant Fees Bill, introduced to parliament yesterday, is designed to “save tenants millions of pounds and make the market fairer and more transparent”.
The proposed bill could save tenants as much as £240m a year, the government said, and “prevent unfair practices” by estate agents.
However, an impact assessment report also conducted by the government found that the bill could cost real estate agents up to £157.1m in the first year alone, while landlords might lose out on as much as £82.9m.
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The new bill would ban real estate agents and landlords from charging fees for granting or renewing leases as well as capping security deposits to no more than six weeks’ rent.
The draft bill also sets out requirements for both landlords and agents on returning a holding deposit to a tenant, and imposes fines and even criminal offences for landlords or agents who breach the ban.
The bill would also amend the Consumer Rights Act 2015 to specify that the real estate agent transparency requirements should apply to newer property platforms like Rightmove and Zoopla.
Commenting on the proposed bill, newly appointed housing secretary James Brokenshire MP said:
“This government is determined to build a housing market fit for the future. Tenants across the country should not be stung by unexpected costs.
“That’s why we’re delivering our promise to ban letting fees, alongside other measures to make renting fairer and more transparent.”
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But the country’s property sector is divided on the bill’s impact.
Dan Wilson Craw, director of tenant advocacy group Generation Rent welcomed the news in a statement to City A.M.
“The ban on letting fees can’t come soon enough,” said WIlson Craw. “Right now letting agents can charge what they like to a captive market of renters, which makes moving house too expensive. Without these rip-off fees, renters will find it easier to move out of unsuitable homes and have more confidence to challenge poor practice and rent increases.”
Despite the possible losses for letters, the National Landlords Association (NLA) also greeted the bill enthusiastically, with London representative Richard Blanco saying that many landlords in the capital support the bill’s passage.
“We feel that the fees that we pay agents to find a tenant and manage the property should be sufficient to cover the agent’s costs,” said Blanco. “Charging for tenancy agreements can feel like profiteering as organisations like the NLA offer model documents for free.”
However, some in the real estate sector are concerned that the bill could discourage competition and cost the industry jobs.
David Cox, chief executive of letting agent body ARLA Propertymark, said: “We do not believe the bill will achieve its aims, as our own research last year demonstrated that tenants will end up worse off and banning fees will not result in a more affordable private rented sector.
“Now that we have greater clarity on what the ban will entail, agents must start preparing for when it comes into force.”
Meanwhile, according to online letting agent Makeurmove, 49 per cent of London landlords could be forced to increase rents as a result of the bill, impacting nearly 900,000 tenants in the capital.
The company’s managing director, Alexandra Morris, said the new bill would put undue pressure on both tenants and landlords, and that the government was “sleep walking” into a crisis.
“The worst-case scenario will be a housing market crash if landlords default on their mortgage payments or decide to cut their losses,” said Morris. “The alarm bells should be ringing, and this should be a major concern for both homeowners and the government.”
Mark Readings founder and CEO of online estate agent House Network, pointed to the government’s own admission that the bill could “cost letting agents between £1bn – £4bn over the first 10 years and as such could affect job losses within the industry”.
However, Readings felt the possible risks to the industry would ultimately be worthwhile in a rapidly changing property market.
“Letting agents work in an extremely competitive marketplace and the tenant ban legislation will enable new business models to come into the market,” said Readings. “The most productive letting agents will overcome this change and the market will be a fairer place for the consumer, which we fully support.”