The Department for Communities and Local Government’s (DCLG) consultation into the banning of letting agent fees charged to tenants closes today.
NALS welcomes the Government’s commitment to a better Private Rented Sector offering safety and security for tenants.
However, NALS does not support a ban on letting agent fees to tenants, because it believes that this will not deliver the outcome to which the Government aspires. NALS believes the vast majority of agents charge tenants fair and reasonable fees for the services that they provide. A survey of 339 firms carried out by NALS in 2016 found that, on average, agents charged tenants £172 (including VAT) for the services they provide to them. Only 8 firms charged over £400.
In our view, the minority of agents who charge unreasonably high fees could be brought into line by proper regulation and enforcement. The fees ban is, therefore, a disproportionate measure. Furthermore, NALS does not believe that abolishing letting agent fees to tenants will make the market more competitive. In practice, it will reduce the range of services on offer to tenants and make it more difficult for tenants to access the Private Rented Sector (PRS). Healthy competition amongst agents could actually be reduced as smaller agents are forced to close or are acquired by larger chains.
NALS believes that in order to ensure a stable sector and fairness for all – tenants, landlords and agents – the implementation of a fee ban must be set within the context of a move to proper, comprehensive regulation of all lettings and management agents. By honing in on the issue of fees to tenants in isolation, the proposed ban risks undermining the business models of the majority of agents whose charges are reasonable.
Smaller agents will be particularly hard hit. Many of these agents currently provide a professional, local service at a reasonable cost. They will come under increased financial pressures if they are unable to charge for basic services and, if they disinvest as a result of their businesses being no longer viable, then competition will decrease. Letting agents who remain in the sector will invariably pass on the revenue loss to landlords, who in turn will increase rents. Tenants will then have to pay this increased rent until the end of the tenancy.
In NALS’ view, the main issue affecting affordability for tenants is not agents’ fees but rather demand for decent privately rented housing exceeding supply. We would suggest that there is a desperate need for more rented accommodation, managed professionally by accredited agents. Growth could be facilitated by introduction of a coherent and comprehensive framework of regulation. Single issue measures, such as the proposed fees ban, are not ultimately in the interests of the consumer.
The full NALS response to the consultation is available here