Government needs more information on letting agents’ fees

20 March 2015

The next Government should assess the impact on the private rented sector before making any decision to ban, or rule out a ban, on letting agents' fees in England, the Communities and Local Government (CLG) Committee says in its new report.

The Committee found that evidence from the existing ban in Scotland wasn’t strong enough to reach a view on its impact there—or the likely effect of any ban in England. Assessments made by bodies in Scotland were divided on whether any change in rent levels could be directly linked to the ban. The Committee called for the next Government to ensure they base their policy towards banning agents’ fees on evidence of its net impact on tenants’ costs and the private rented market.

Clive Betts MP said

"Last week the Government announced it had 'considered but ruled out a ban on fees, as this will simply increase rents for tenants.' Labour Party policy is to introduce a ban in England. Neither position is underpinned with convincing evidence. First, in Scotland the jury’s still out on the question of whether fees lead directly to higher rents. And second, the impact of any ban on fees may be much more significant than simply on rents. None of the evidence from Scotland attempted to calculate the net effect on housing payments for tenants over the whole life of a tenancy. Nor did it look at the wider operation of the private rented market—for example, whether a ban leads to any change in the use of agents; in the costs they charge to landlords; or in the length of tenancies offered."

Situation in Scotland

The Committee assessed four reports on the ban in Scotland. On the one hand:

  • Shelter said landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK; and
  • Generation Rent concluded there had been no research showing a causal link either way between ending lettings agents’ fees for tenants and a rise in rents.

On the other hand:

  • The Scottish Landlords Association and the Council of Letting Agents said it was realistic to suggest an increase in rents which it identified was due at least in part to the ban; and
  • the National Association of Landlords also noted a rise and said letting fees had been transferred into rent.

The Committee's conclusion

The Committee concluded that before reaching a decision ministers would need to know the extent to which any increase in rents was attributable either to a ban or to other factors, and whether this increase was offset by the reduction in upfront fees.  The CLG Committee agreed that to determine the likely impact of introducing a ban on letting agents’ fees in England the net impact on tenants in terms of rents, access to property and other costs, including agents’ additional fees, would need to be assessed.

Commenting on the report, Clive Betts MP, Chair, said

"Even if a ban is shown beyond doubt to lead to higher rents, it should not be ruled out. It may enable people to spread the costs of renting more comfortably across the duration of their tenancy. But the impact on rents is just one factor to consider. A decision whether or not to recommend a ban on fees should depend not only on its impact on rent, but on benefits in terms of consumer confidence and market transparency. The next Government’s policy should be evidence-based and look at all three."

Further information

Image: iStockPhoto 

More news on: Parliament, government and politics, Housing and planning, Housing, Parliament, House of Commons news, Commons news, Scotland, Committee news, Private rented housing

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