It would appear that the government are pretending to favour tenants in the hope of getting back the feel good factor during the Brexit void, possibly with the hopeful double whammy of additional votes at the next election. Don’t be fooled though, the reality of this situation is actually very different indeed.
Wednesday November 23rd marked yet another milestone for the Letting Industry with the government choosing more soft targets. Accredited agents, responsible landlords and in this case far more importantly, tenants! The obvious rationale being to woo tenants into liking (and hopefully voting for) them, by offering a blanket “No Fee” structure for them across England & Wales. Sounds a great deal for tenants doesn’t it?
Is it really as good as it sounds? Let’s just look at the proposed deal little more closely and you can decide for yourself.
Last week’s proposal in the chancellor’s statement certainly caught the letting sector by surprise, so why on earth didn’t we see it coming? Let’s face it, is not a new proposal by any means.
Could it have been because Theresa May has already voted against this initiative twice before becoming Prime Minister? Or that less than three months ago (September 2016), the current housing Minister Gavin Barwell was equally against this becoming law? I will outline their concerns later, having first briefly covered the history of the proposal / initiative for you.
It is of course important that you have a fair and balanced take on this situation if you are making an informed decision on this proposal as I urge you all to do. At this point it’s also important to remind you and I must stress, this is currently only a proposal but the government have already said on the day, that they want to implement this as soon as possible. Yet just one week later Rachel Williamson from the Department of Communities and Local government indicated that the tenant fee ban won’t come in until at least 2018 with the consultation in the New Year!
Despite certain individuals and politicians trying to take credit for this initiative, I believe that the instigation for the decision actually came from the housing charity Shelter who have actively petitioned against tenant fees in England since 2013. Whilst I very much appreciate that Shelter are well-meaning in their approach to campaign against homelessness and lack of adequate social housing, they are unfortunately achieving quite the opposite, in truth making the problem much worse. The root of the problem (lack of adequate, affordable social housing) has been masked yet again and the blame put on to Landlords, who in reality are providing a very necessary service in the absence of any governmental support.
You may well be aware of the current law in Scotland introduced in 2012 banning tenant fees north of the border. Shelter again was the driving force behind this and although I am no authority on Scottish law, I understand that there was actually no law in the first place, allowing the charging of fees in Scotland anyway. The situation in England is entirely different. In fact the Consumer Rights Act 2015 states, estate and letting agents can be fined up to £5000 by Trading Standards for not displaying their letting fees both in their offices and on their website.
I was recently made aware of one gentleman that was so concerned at the lack of compliance on this new law, he either rang, visited, or checked websites of 100 agents to see if this law was being upheld. He found that less than 30% were compliant. Its more than a little bit concerning that these laws are passed and not even upheld or enforced!
Sadly (in my opinion), this is the reason this country is in such a state of disarray. We have career politicians making laws they truly don’t understand (especially the implications of), imposing heavy draconian fines that never happen because they don’t have the finance to police the laws they pass.
If our politicians used common sense or sourced industry specialists to assist with important decisions, they would realise they have just created a self-funding proposition, which would cost nothing to operate, in fact it could actually make them money. In addition this would increase employment and finally monitor responsibly this industry sector more effectively, and improve this situation for all concerned. It is a matter of simple business logic.
So, if it has been such a success in Scotland (as shelters many blogs on the subject would have you believe), why not do it in England? Good call, what clever and astute politicians we have. Right? However even ignoring the last paragraph, I mentioned earlier that both Theresa May and Gavin Barwell were against this until this week. So why was that?
In Scotland it is well documented that when the ban on tenant fees came into place in 2012. The cost to landlords went up to cover the lost tenant fees and as a knock on effect, to mitigate the hit on their income, landlords simply put up the rents to cover their additional costs. Whilst I have no definitive evidence of the current impact in Scotland other than several online investigititive blogs (from all sides) and a BBC website that shows what the average rent in each area of the UK is.
If you go to this website; http://www.bbc.co.uk/news/business-23234033 you will clearly see that a mid-priced 2 bedroom property for rent in Newcastle is £595, Durham, £410 Sunderland £475, Glasgow £595, Edinburgh £800 and Aberdeen £750
A three bedroomed mid-price property for rent in Newcastle is £700, Durham, £472, Sunderland £525, Glasgow £650, Edinburgh £1065 and Aberdeen £950.
I have heard anecdotally that Scottish rents have increased by 20%. Shelter quote 3% and the BBC quote 9% and City Index (Scotland’s equivalent to right Move) have quoted 15.3% from 2012 -to 2016, The Scottish statistics as I have said come from City index, the English regions are taken from the office of National statistics (ONS), so I would say having looked at the figures below, the rents above I believe, speak for themselves.
Rent increases 2012 – 2016
East Midlands – 5.9%
East of England – 7.1%
London – 10.6%
North East – 2.2%
North West – 2.4%
Scotland – 15.3%
South east – 8.3%
South West – 5.8%
West Midlands – 5.5%
Yorkshire & Humber – 4.2%
It’s also quite obvious that whereas the tenants in Scotland were indeed better off when this law was very first passed, now that the rents have increased overall they are in fact considerably worse off. We recently had a potential tenant in our Durham office who commented that like for like our properties were considerably less expensive than where he was moving from (which was Aberdeen). This seems to move the statistics above from anecdotal information, well into the realms of fact.
So why would our politicians want this clearly poorly thought through decision?
Well that’s really for you as a reader to make your own minds up about. All I can say is that my company and most other competent, fair, accredited law abiding agents are against the banning of fees. and not as a matter of profit, our fees have to be paid regardless. We simply recognise it is just not in the best interest of tenants who after all are our customers. We need and appreciate good tenants and landlords which we have to look after, if we want to attract and keep them as our clients.
Even if landlords are hit with higher charges (which is inevitable), they are of course legitimate business expenses (something politicians are very well versed in this area if you believe the papers), so they will be able to offset some of the additional costs against tax, the rest they will simply cover by increasing rents.
What if the tenants won’t/ can’t pay the increased rents. Simply put the proposal is potentially forcing tenants into lower quality accommodation at a higher price so who loses out? Tenants of course!
Ultimately, we, and our accreditation providers, see our role as agents, as appearing transparent and fair. To be able to walk a straight line between both the tenant and landlord whilst not being ‘on either side’ We currently offer impartial advice to both sides often helping to broker deals and find a way around issues for all concerned so a let can take place and a harmonious relationship between landlord and tenant can evolve.
We currently charge both parties equally and our role is to help and support everyone involved. If we are forced by the government to only be responsible to one party (the landlord), where does that leave the poor tenant? I personally think this is neither just nor fair.
Finally, you may well at this point be questioning my motivation in this matter. Is it sour grapes? Am I just angry because I am going to lose money? Let me clear that one up for you straight away. Yes I am angry, not because I am going to lose money because I am not. I am angry because it is a flawed proposition and in my opinion it is totally and utterly morally wrong. Once again I refer you to the Scotland situation and the ongoing repercussions to the tenant. These costs had to be covered from somewhere so the agents passed the cost to the landlords. The landlords in turn increased their rents to cover their additional costs which in turn increased overall the amount of fees that the agents charged and received.
This means that in Scotland, both the landlord and the agent have benefited from this legislation and it is ONLY the tenants who are suffering as a result. We simply feel that what the government are proposing to tenants is not in their best interest, it is morally incorrect and definitely not resolving the real issue which is a lack of adequate affordable social housing, bad landlords and equally bad, unaccredited agents.
What in my opinion is really required, is a complete overhaul of this very complicated, over regulated under scrutinised market place that has been meddled in by politicians for far too long, either for their own gain, whether that be financially, votes, or as it now seems to appear, both.
What is very apparent to me (and hopefully you) from this whole episode, is that government is clearly listening to the wrong advisors and they don’t appear to understand the dire implications of their draconian actions. What is sorely needed now is a common sense approach to make it a fairer place for all involved. That however is another story for another day!
If you want to discuss this article or your letting needs, please feel free to call me at my Durham office on 0191 212 6970.
Hot off the Press
Now having read my article, if you agree that this proposed act of parliament is not to the benefit of the tenant (as they would have you believe), then I would urge you to sign the online petition below. Everyone deserves a voice, everyone deserves the best service and that includes all parties. The choice is yours and as we live in a real democracy I hope you will exercise your democratic right, to vote for what you believe to be right, fair and decent for all concerned. Thank you.
Just click this link to sign the petition “Remove the Ban on agency fees and set a cap for fees instead.”