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Rents Increase As A Result Of The "Tenant Fees Ban"

Rents Increase As A Result Of The "Tenant Fees Ban"

There was an article in the Guardian suggesting that landlords are being urged to increase rents by their letting agents in order to make up the shortfall in the letting agents income due to the Tenant Fees Ban and we were asked by Cllr. Sanders (PCC) whether we have seen evidence of this locally.

As the ban only took effect on June 1st, it is probably too soon to say but if a letting agent is facing much reduced income, it seems likely they would rather suggest that their clients put their rents up (thus increasing commission income and making the clients think they are earning more) than tell them the management fee was increasing by x %  and risk losing landlords.

If you have seen any evidence of how letting agents are changing their business model in order to continue to operate but within the new restrictions, do let us know:  This email address is being protected from spambots. You need JavaScript enabled to view it.

To date, this is what we have heard from one member who is an agent and a landlord:  “In my discussions with landlords I have been told to cover any and all increases in referencing fees by increasing the rent accordingly across the year”

He added that he had also heard: “Tenant find fees increased by one agent from £200 to £600 (to the landlord),  £15.00 per month added to each student room (so a 5 bed house went up by £825 per year). In this case the agent increased their management fees to the landlord from 9.6% to 11.6% meaning that the landlord gained none of the  increased rent. Many agents are concerned and are finding new ways to cover their losses”

PDPLA Vice Chair, Alwin Oliver said, “Although I think that there will be a one off inflationary cost to tenants, I do not think this is the most important aspect.  I believe, as I said at the last meeting, the long term impact will be on the sudden improvement in referencing, including requiring payment history from tenants (rather than a reference).

As an example, I met a landlord and student tenant who were at odds with each other today to try to find a solution for an impasse.  In looking at her rent payment history I see that of 10 payments due to date 4 were late.  When I pointed out the impact that this may have she was mortified.  She had no idea.  She is not alone

These changes are the side effect of the Tenant Fees Ban Act.  Put simply as we are no longer able to rely on late payment charges we have learned to get a lot better at tenant selection

For years home owners with a poor credit history have been able to get expensive “subprime” mortgages with a higher interest rate to reflect the risk they present to a mortgage company

I wonder how long it will be before we see “subprime” rent agreements or rent guarantee policies required by landlords or agents for those with patchy histories?

It is quite wrong in my view to assume that the only impact of the fees ban is the obvious one of a one off rent hike.  The world of big data is changing everything and there is no reason to expect that rent will be any different”

Alwin is probably right in his view that the Tenant Fees ban could push some potential tenants out of the private rented sector completely – hopefully the social housing sector are ready to pick up these riskier tenants.

PDPLA Committee guru Tony Athill added, “It is a bit early to say how it will pan out. I expect rents will go up.  Some if not most agents were reliant on fees to survive. Over the years commission has fallen and fees gone up. 

Agents have got more competitive and this has forced them to drop commission and make their money on fees and marking up services they provide to the landlord. 

In the fullness of time I expect the cost to tenants overall averaging out. Those who move about gain from no fees, those who stay put will lose out. 

Rents will go up as the tenant pays for what has to be done one way or another. Increased legislation costs us. 

Hopefully overly greedy agents will go out of business. There are plenty out there to fill the gap.

What I think will push rents up more for those at the more affordable end is a lack of supply. Adding all that is happening in our world together supply is falling and this will push up rents.

Landlords at the affordable end (once housing benefit dependant) are giving up. Some sell to new, often inexperienced, landlords, others are doing their properties up so they can command a higher rent. Overall the PRS is probably not shrinking, it is growing at the smarter, more costly end and shrinking at the bottom end. But don’t take my word for it-

https://news.rla.org.uk/rent-rises-caused-by-drop-in-supply-say-landlords/

To illustrate how market forces work, some years ago I was trying to compare LHA rates with what was available. I got stuck on 4 bedroom houses. Looking on Rightmove there appeared to be a huge jump from 3 bed properties and they were certainly way out of reach to anyone on benefits. (In those days LHA was almost keeping up with the market.) Puzzled I called a few agents. It turned out that they all knew that there was only one 4 bed property on the market in the whore area. It is the law of supply and demand. (When I asked why I could see others on offer I discovered that the agents need to have a full range of properties on their web site and in the windows to get customers through the door. When you enquire it is ‘sorry you are too late it is taken'. This also encourages tenants to make quick decisions when they do find something).

I think there is something we can learn from Alwin’s mediation exercise between a sloppy payer and desperate landlord. Many tenants do not understand that their landlord can themselves be in big trouble if rent is not paid. When talking to Havant about what they could to improve PRS access, tenant training was high on our agenda. When I am looking for tenants I aim for former home owners. A generalisation but they get money management, ASB, care of fixtures and fittings etc. â€

Written & oral information and advice from the Portsmouth & District Private Landlord's Association is given in good faith, but no responsibility whatsoever is accepted by the Association or it's officers for the accuracy of it's information & advice nor shall the Association be held responsible for the consequences of reliance upon such information.

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