Queen’s Speech confirms letting fees will be banned in England

Several policies set out in the UK Government’s Housing White Paper earlier this year have been confirmed at the opening of the new Parliament in London, including a ban on letting fees.

The Queen’s Speech said that there will be a new Housing Bill which will aim to promote fairness and transparency in the market and allow for the building of more new homes.

The ban on letting agent fees will go ahead in the next Parliamentary Session which will cover the next two years with the 2018 Queen’s Speech being cancelled to allow the Government to concentrate on Brexit.

The speech says that the Government hopes that by increasing competition in the private rental sector it will result in lower overall costs and a higher quality of service for renters.

The new law will ban landlords and agents from requiring tenants to pay letting fees as a condition of their tenancy. It will also include ways for tenants to recover unlawfully charged fees. Letting fees are already banned in Scotland.

The average amount paid in fees is currently £223, according to Government figures and the chancellor, Philip Hammond, previously said that 4.3m households pay such fees every year. However, housing charity Shelter research suggests that one in seven renters pays more than £500 and tenants in London have complained about fees of up to £2,000.

David Cox, chief executive of the Association of Residential Letting Agents, said he is concerned that the ban on letting fees will be rushed through without taking sufficient notice of the consultation.

‘It’s unlikely the Government had enough time to analyse all of the responses from the consultation, as it only closed 12 working days ago, on the 02 June. It appears they had already made their decision and therefore the consultation was no more than a tick box exercise and they haven’t appropriately taken the industry’s views into account,’ he said.

‘A ban on letting agent fees will cost the sector jobs, make buy to let investment even less attractive, and ultimately result in the costs being passed on to tenants,’ he added.

Cox also pointed out that research conducted by Capital Economics for ARLA earlier this year found that referencing checks undertaken by agents take, on average, eight hours to complete. ‘It is therefore right and proportionate that the industry is recompensed for this work, which benefits tenants,’ Cox said.

The research also showed that letting agents stand to lose around £200 million in turnover, potentially costing the sector 4,000 jobs. Landlords themselves could lose £300 million, meaning they may seek to cover their losses by increasing rents to tenants.

‘On average, rent costs will go up by £103 per tenant, per year, ultimately meaning tenants who move more frequently will reap savings on their overall costs but longer term tenants, who are usually lower income families, will see a loss as their rents rise year on year. The ban contradicts the Government’s stated aim to encourage longer term tenancies, as tenants who stay in their homes for the long term will end up shouldering the costs of those who move more frequently,’ he added,

Lucy Morton, head of residential at JLL, pointed out that charges made by letting agents to tenants at the commencement of their tenancies should have been levied only to cover reasonable administration and referencing costs.

‘However this has been abused by some Agents who have been overcharging for their gain and to the detriment of tenants so the Government has now acted and will be banning letting agents from making these charges,’ she said.

‘Reasonable charges including referencing costs may now be charged to landlords which in turn may then be added to the annual rent. It is essential that agents do not cut corners and fail to carry out stringent referencing checks,’ she added.

Hannah McDougall, lettings manager at UK Sotheby’s International Realty, believes that there has been a wide debate on the matter but the ban will have knock-on effects throughout the market.

‘We hope a decision to ban fees charged to tenants will help to encourage greater consistency across the market and draw attention to protecting vulnerable tenants by stamping out any unreasonable fees enforced by a small minority of landlords and agents,’ she explained

‘It is however, still unclear who these fees will fall to and many are concerned that rents may rise as a result. Until a firm policy is brought into effect, our focus must remain on serving our clients’ best interests and doing everything possible to simplify the process of finding a new home,’ she added.

A Bill to continue the progress of the High Speed Two rail line between Birmingham and Manchester will also be brought forward. This gives some certainty to home owners along the route who may be entitled to compensation and/or have their homes purchased at the going rate.

With Brexit taking front of stage, reaction from the property industry was muted and will now create concerns that housing, instead of being a major part of the next Parliament, will again be pushed down the political agenda.

Russell Quirk, chief executive officer of online estate agents eMoov was not impressed. ‘The Government yet again is setting out to revitalise its approach to housing only for us to look back and realise that the previous hype and hot air has evaporated with no tangible action what so ever,’ he said.

‘Promises to address unfair tenant fees and promote fairness, transparency and prosperity in the housing market while building more homes, are worthy intentions indeed but ones that are all too familiar yet remain unresolved,’ he explained.

‘The announcement on the HS2 railway is a significant one where the UK property market is concerned. Although it will negatively impact house prices in the path of the route itself, the areas due to benefit as destinations will see positive growth as it opens up accessibility to more of the country in terms of commuting to major cities from more affordable areas,’ he added.

Randeesh Sandhu, chief executive officer of Urban Exposure, was also disappointed. ‘From a property perspective it was disappointing to see a lack of policy directly addressing the sector. There are still a number of hurdles holding ambitious builders back and we would like to see the Government commit to addressing these, including helping smaller developers access public land and appropriate finance,’ he said.

‘The market remains in good shape fundamentally, but the UK is still not building enough homes to meet growing demand. We believe it is essential that further steps are taken by the Government, in partnership with local authorities and the finance community, to deliver the new homes the UK needs,’ he added.

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Written by: Houseladder