Tenant fees have been banned. The move was announced in Philip Hammond’s first Autumn Statement last week and has delivered another damning blow to landlords.
As we’ve discussed previously, recent changes have already put a squeeze on landlord profit margin. Now the ban on tenant fees has been brought in, things just seem to be getting worse.
What are tenant fees?
Previously, tenant fees could be charged by letting agents to cover the administrative costs of a new tenancy. These administrative costs would include the checking of references, inventories and drafting contracts. According to Citizens Advice, the average tenant fees cost around £337. Housing charity Shelter claims they can reach as much as £500.
Quick Move Now’s managing director, Danny Luke, says:
The tenant fees announcement that came as part of the Autumn Statement is more bad news for landlords. Already under financial pressure from tax relief changes, increased stamp duty and new wear and tear rulings, this is not the news landlords were hoping for.
Whilst the tenant fees ban has been implemented in an attempt to help tenants, ultimately this can only be bad news for them. Many landlords are already struggling to keep their business profitable. These landlords will have little choice but to pass the tenancy costs back to the tenant by increasing rent. Tenant fees were abolished in Scotland in 2012 and we saw rents rise by 2.3% across Scotland. Areas such as Edinburgh and Aberdeen saw even higher increases, 5.1% and 6.3% respectively*.
As we’ve previously reported, rent arrears are already a well-established problem. With both landlords and tenants feeling financial pressure, serious questions need to be asked about the future of property rentals.
As many as one-in-four landlords have said they either have sold, or are planning to sell their buy-to-let property as a result of the tax relief changes. Placing more financial pressure on landlords is only going to compound that issue and lead to a greater shortage of rental properties.
*Scottish rent rise data from Citylets