Letting agent fees are the second biggest cost for buy-to-let landlords and could rise further if tenant charges are banned, research claims.
Research by lender Kent Reliance, looking at the costs of running a buy-to-let portfolio, found that landlords spend £4.7bn each year on agent fees at an average of £870 per property.
The figures were compiled based on desktop research of ‘mid-tier’ letting agent fees and goes towards the average £3,632 a year that landlords estimate they spend on running a buy-to-let property.
The highest running cost was property upkeep and maintenance at £1,025.
The report acknowledges that lettings charges for landlords could get higher if a tenant fee ban is introduced, stating: “If we do see tenant fees prohibited, and as planned following the Government’s consultation, we may see landlords’ costs rise further, as letting agents seek to recoup lost revenues.
“No doubt many landlords will try to absorb these costs or pass them on to their tenants in the form of rent increases, but there is likely to be a lag before they can be fully recouped.”
The prospect of increased costs as well as rising Stamp Duty and the end of mortgage interest relief means 36% of landlords are looking at making cuts, the report warns.
Property upkeep and maintenance was the most popular area identified by 17% of landlords, followed by letting agent fees and mortgage costs among 10%.
Taking the 5.3m properties in the rental sector and the running, purchasing and mortgage costs, the report estimates that overall, landlords currently contribute £15.9bn per year to the British economy through pre-tax spending on running their portfolios, supporting thousands of jobs.
John Eastgate, sales and marketing director of OneSavings Bank, parent company of Kent Reliance, said: “Landlords may seem like an easy target for political point scoring, but they play a vital role in the economy.
“Not only do they house a huge proportion of the country’s workforce, bridging the housing demand and supply gap, their spending supports thousands of jobs – whether builders, cleaners, lawyers and accountants or letting agents.
“Trying to tackle the housing crisis by targeting landlords with punitive taxes is very simple and politically highly palatable, but has unintended consequences. Either it means less work for all those who support the property industry, or it means tenants will have to foot the bill for the Government’s tax raid, or both.
“One side effect of the recent changes, and rising running costs, will be the professionalisation of the sector as amateur and accidental landlords leave the market. There is nothing wrong with having fewer, bigger landlords, but that alone will not help more young people get homes.”