Last week, Philip Hammond announced the abolition of letting agents fees made to tenants in his 2016 Autumn Statement. This ruling is set to take effect in 2018, earliest, and will have an impact on over four million households who currently reside in rental accommodation.
The average saving for a typical tenancy is set to be around £300-350, and in some cases could save renters up to £1,000.
The move has been brought in due to stop unscrupulous agents charging extortionate amounts to prospective tenants (and also sometimes the landlord) for referencing, credit checks and other administrative tasks.
However, in reality, the vast majority of agencies charge a fair and reasonable amount for conducting these checks and, to date, have passed this cost on to the tenant.
The net effect of this ruling will be that the cost has to be borne by someone else - the landlord - as an additional cost to finding a new tenant for a property.
The result is that expenses for landlords will go up. As with any business expense, the true cost often impacts the end user - in this case, the tenants. Landlords are much more likely to need to increase rents, and this has been exacerbated by yet more political intervention in the form of the tax changes due to descend from next April.
So, in all honesty, what was meant to help
tenants and make them a saving is inevitably going to back-fire.
On top of this, and something which has not been mentioned at all (as far as I have read) is that a modest initial charge to tenants for actual costs to reference, etc, goes a long way towards agents and landlords being protected from 'rogue' tenants. As with any situation, it is never completely one-sided.
Are letting agents and landlords meant to now foot the bill to reference tenants who know that they are likely to fail referencing checks? What about the time-wasting element of such a scenario? Until now, I have always been fairly reassured to know that my tenants have had to come part of the way towards wanting to live in one of my properties. It shows an element of commitment and honesty and, when I have either referenced people myself, or gone through an agency, I have always made sure that the tenant's charges are minimal.
What it does show is the lack of understanding by the Government of this business. Even the Housing Minister, Gavin Barwell MP, was reported to have said it was a bad idea.
What may have been a fairer way to deal with the issue of overcharging could have been to either place a cap on the fees agents could charge, or better transparency and a 'code of fair practice' in relation to charges made. Alternatively, a payment made upfront by the tenant which is then refunded upon successful application and references would have been another way to go.
On another note, however still related to housing, the Chancellor's plan to borrow heavily in order to invest in housing infrastructure in areas of high demand and to create more affordable homes, (as well as other sectors of the UK economy) is an interesting move.
I'm sure the plan is to alleviate the pressure on social housing and bring in more institutional housing schemes which are meant to cater for a great many people. This, in essence, is welcome news for many families who are struggling to find affordable places to live.
However, I can't help thinking that the squeeze on the PRS, caused by the number of changes the Government has made, is going to be a continued cause of stress for many landlords and tenants alike.
By trying to outmanoeuvre private landlords, is this not just going to scare many people into selling off their rental properties, or force landlords to concentrate on renting only to working people? With the further pressure this could create on housing, and the likely slow rate of bringing these 'new build' homes into existence, I foresee yet more challenges to come for the sector as a whole.
With this is mind, I have been focussing heavily over recent months to enable landlords, both those new to the business and the more experienced alike, to go into or continue to build their businesses with their eyes wide open.
With change comes uncertainty. With uncertainty comes fear. The question is, would you like to know how to navigate your way through these choppy waters and remain confident and certain about what you are doing? If so, I have put together a series of Free Training Videos which you may find particularly useful in your property endeavours.
I hope they help!
Hazel de Kloe
Property Investor | Property Mentor | Speaker | Author
The contents of this article are for educational purposes only and we make no recommendation of any particular property purchase. The price of property can decrease as well as increase and you make any investments in property at your own risk.