The number of letting agents seeing landlords increasing rents has hit a two-year high.
The latest ARLA Propertymark Private Rented Sector report, based on a survey of 216 member branches, shows the proportion of letting agents who saw landlords increasing rent costs for tenants rose to 35% in August – the highest level since July 2015, when 37% saw rents increase.
Year on year, this figure has risen from 27%, while just 2% successfully negotiated a reduction last month, down from 2.5% in July.
Both demand and supply has also dropped, with the number of prospective tenants falling from 72 to 70 per member branch between July and August, while the number of properties managed declined from 192 to 189 over the same period.
David Cox, chief executive of ARLA Propertymark, said: “This month’s findings paint another bleak picture for tenants.
“In November last year, only 16% of agents saw landlords increasing rent costs, but that figure now stands at 35% – which is likely to continue rising.
“Landlords have had a rough ride at the hands of policy changes at Government level, and it’s becoming clear that these additional costs are now being passed on to tenants.”
“Landlords have had a rough ride at the hands of policy changes at Government level, and it’s becoming clear that these additional costs are now being passed on to tenants.”
Be fair to old George, he did not have the intellect to predict this.
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Tenants can thank George Osborne for these rent rises and they look forward to sizable annual rises for the next 4 years as Sec.24 is phased in.
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The proposed change in the legislation is a justifiable response to a situation that has been exploited by agents, and landlords. And indeed, agents are referring to it as a ‘ban’ as such a word has a more dramatic effect, rather than demonstrating that it is common sense. The fees do exploit some of the most vulnerable people in society, and agents have commonly encouraged landlord to use s21, knowing that they can make a profit form fees. The amount of work by an agent does not justify the fees charged, electronic reference can be obtained for a minimal cost, and often a generic AST contract is sent to a prospective tenant, with no modifications made, unless requested. As for 2s4, again that is fully justified, and creates a more level playing field. The initial problem is that the private rented sector has grown exponentially due to very low mortgage rates, BTL mortgages have been very easy to obtain, requiring less validation than that required for a prospective owner occupier. As a professional sole trader, in property,I have to pay taxes, which overall can come to around 70% of nett income. I do not start a campaign, such a various rental bodies have, simply because I do not have a sector that can be seen as vulnerable. The fact that those bodies act as they do, does show how private tenants are vulnerable, and that they do need to be protected. The Government has acted appropriately, and does need to do considerably more to protect tenants. As for alleged rent rises in Scotland, there is also evidence that that was no rent rise due to the change in the legislation. It comes down to misrepresentation of statistics.
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Neill30, you wrote “As a professional sole trader, in property,I have to pay taxes, which overall can come to around 70% of nett income.”
The highest rate of income tax is 45%. Parts of your income are taxed at 0%, 20% and 40%, so the effective rate is less than 45%. How do you arrive at 70%?
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…add VAT and National Insurance, as any business person would be aware of.
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If your business is registered for VAT you do not bear the tax, the end-user does.
If it is not registered, the VAT that you bear is part of your costs, which are deducted from your receipts to arrive at your taxable income.
In neither case is 20% VAT payable on your taxable income.
Under Section 24, however, some landlords will pay 100% or more of their rental profit in tax. Tax will be payable even when there is a rental loss, making the tax rate infinite.
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“….As for 2s4, again that is fully justified, and creates a more level playing field. ”
Please explain why you think it is justifiable? when every industry expert, accountant, and media commentator says this is nonsense. Or have you just fallen for George Osborne’s sophistry?
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Neill30. There are too many problems in your analysis to deal with – or rather I’m not willing to spend the time on them. What I will say is that s24 ‘protects’ neither tenant nor putative owner-occupier. I have increased my rents by 13% between 2015 and 2017 because of Section 24 and this is now new practice for me – to increase rents on tenants in situ every 12 months and to push rents as high as they will go on any new let – this is all to gather the large sums I will need to hand to the Exchequer. It is very strange to see the anti-PRS policies of Government as forming some kind of ‘protection’ for tenants, when what they mostly mean is that tenants will pay much higher rents.
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The increase in rent rises are no surprise. I have noticed that landlords who have not increased their tenants rent for 5 to 6 years are now doing so, they did not increase the rent as the tenants were long term, kept the property well and were considered good tenants, in my area (rural Norfolk) most landlords just want a long term good tenant. Now that the landlords expenditure has risen and will continue to rise over the next few years, they have no alternative but to increase the rent or sell. Regarding the tenant fee ban, most agents charged a reasonable price for the work they do, increasingly we are finding that we have to spend 2-3 hours of work trying to get a tenant through referencing , mainly chasing them for information. More tenants seem unable or unwilling to fill a simple information form in, supply the documents we need to reference them and for the right to rent checks or even turn up on time to sign the AST. I have 1 member of staff who chases, full time. It all changes when they are in a property and the boiler breaks down, they want it mended now. I do understand that tenants want a property in good condition with everything working and a good service from their agents when the rents are at the level they are now but, without tenant fees the service we will be able to offer will decrease as we will possibly not be able to keep the staff levels as they are now. I believe that the political decisions made will create a large void for tenants who have any sort of credit history, why would a landlord want to pay for a reference which is likely to fail, why would a landlord take a pet when an extra deposit is no longer an option. Why would a landlord pay for a tenant who also needs a guarantor to be referenced. Just these three categories of tenants will have real problems renting, however there is always the local authority housing to fall back on! All I can see is a rise in homelessness in the future and that is sad.
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Well said Harper51. All of what you have described will impact on our industry in such a way that no one wins except the Chancellor, after all whichever way you dress this up it is a tax grab.
As with any business if the costs increase they have to passed on to the end user and unfortunately this will undoubtedly lead to many more homeless people up and down our country. If you also take into account Universal Credit which by it’s very nature will exclude many of the most vulnerable members of our society from renting as landlords fear that they will rarely see the rent being paid. Couple this with the fact that a landlord with a buy to let mortgage will not be able to let to anyone that is unemployed as the lender will not allow it and that in itself will cause massive problems to the people that need the most help.
So with all this butchering of the PRS going on you would think that the local authorities would make provision to cope with the aftershock of what is quite obviously going to happen. Yeah you’d think so wouldn’t you. So why are authorities that have introduced selective licencing and driven landlords out of their area having to travel to boroughs outside of their catchment area in an attempt to attract private landlords that will take the homeless people that they can no longer house. And all this is happening before the real changes kick in. I do not profess to be a genius or academically gifted, alas would that it were so, but you do not need to be Einstein to see what is, to quote Basil Fawlty, patently bleedin obvious and I cannot for the life of me figure out why such absurd politics are being allowed to ruin what was once a Great Britain. Do the government think news reports and documentaries showing homeless people frequenting ever increasing numbers of food banks are a good advert for attracting investment to our country ?
I sincerely hope that much of this ridiculous legislation is reviewed and amended before being implemented and before too much damage has been done. Do I expect it to be ? ‘heavy sigh’.
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Neill30 poor show.
the others have answered your comments very comprehensively.
the fact that I can’t charge a fee for the time my staff Spend with tenants and helping them is absurd!
I have a tenant who is being harassed by their landlord, so much so it’s causing anxiety and stress to a severe level. Im advising them on their position and helping source alternative accommodation. When they ban tenant fees I’ll have to spend my time with people that make me money as every penny will count and making that 45 minute call to pacify them will cost me. I won’t be able to help tenants anymore even if I want to. Is that fair!??
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Votta,
How would your business model have been in terms of assisting a tenant if you had never been able to charge tenant fees in the first place? I suspect that your business would be profitable, and that the efforts at assisting a tenant would be exactly the same. This is part of the problem, that a business model did develop, of upfront charge to tenants. If we make a comparison, when you go shopping at Tesco (or elsewhere), do you have to pay a fee in advance? Definitely not, and retail businesses know better how to look after their customers, to make a profit, and to be competitive. As well as being on exactly the right side of the law. They do not suddenly declare for instance, that they will increase prices, due to a rise in the taxes that they have to pay (VAT an exception of course). Agents and landlords you will have to realise that the change (and not a ‘ban’) is fair, just and equitable.
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Tesco will not declare that it is increasing prices because of higher taxes, it has no need to declare. The prices are just silently increased, the end user always pays all the taxes.
Now back to property let us have none of this nonsense of charging home buyers up front fees, mortgage brokering fees, solicitors fees, stamp duty etc let us have a level playing field with renters.
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