Landlord News

Will Lettings Fee Ban Force Landlords Out of the Sector?

Em Morley - November 24, 2016

Following yesterday’s Autumn Statement announcement, the industry fears that the lettings fee ban may force landlords out of the private rental sector.

Will Lettings Fee Ban Force Landlords Out of the Sector?

Will Lettings Fee Ban Force Landlords Out of the Sector?

In his first Autumn Statement, Chancellor Philip Hammond revealed plans to ban lettings fees “as soon as possible”. He believes the ban will save the country’s 4.3m private tenants hundreds of pounds.

But the lettings fee ban may have a detrimental effect on how many landlords still make a profit from renting out homes, believes Paul Shamplina, the Founder of Landlord Action.

“Although there had been some whisperings, confirmation of this announcement will be a big shock to the industry,” he believes. “It is realistic to assume that the ban on letting agent fees to tenants, which will leave a black hole in agents’ profits, will need to be partly recuperated through letting and management fees.”

He explains how this will affect landlords: “At the end of what has already been a tough year for landlords, and with uncertain times ahead, agents hiking up fees could be the final straw for some landlords and see them exit the private rented sector. Those that wish to hold onto their rental properties will have to increase rents in order to cover their costs. We could even see a surge of landlords opting to self-let and manage, which I believe will have a detrimental effect on rental property standards.”

He advises letting agents: “Agents will need to be forward thinking about how they can absorb some of this cost and the loss through other areas of their business. It has never been more vital for agents to educate less experienced landlords on the importance and benefits of a managed service, making sure they are compliant with industry legislation and preventing them from exiting the private rental sector altogether.”

But could the lettings fee ban be a good thing?

Simon Thompson, the Director of AccommodationForStudents.com, says: “With a recent report revealing the housing shortage in some university cities has driven rents up by as much as 10%, the scrapping of agent fees will be welcome news to students. Until now, students had no choice but to pay varying fees in order to secure the accommodation they want.”

But he is also wary of landlords choosing to self-let: “However, this could also have a negative effect on the rental market in the long term. It is likely that agents will be forced to increase landlord fees to cover their losses, which in turn will see landlords increase rents even further, negating any saving made to tenants in the first place.

“Those landlords that typically choose to appoint an agent to manage their properties are usually either less experienced than self-managed landlords, or do not have the time to manage their properties. If more landlords choose to self-manage to save on letting agent fees, this could lead to a rise in poorly managed and maintained properties.”

How will the lettings fee ban affect your investment in the sector?