Tenants bear the brunt of fall-out in wake of tenancy fees ban, says ARLA

ARLA is reporting record rent rises in the immediate wake of the tenancy fees ban which came into force in England on June 1.

It says that 55% of its agents saw landlords hike their rents in June, up from 22% in May – which was itself a record.

ARLA also said that landlords are continuing to exit the market, at the rate of four per branch during June.

David Cox, ARLA Propertymark chief executive, said: “Unsurprisingly, rent costs hit a record high in June as tenants suffered the impact of the tenant fee ban.

“Ever since the Government proposed the ban, we warned that tenants would continue to pay the same amount, but the cost would be passed on to tenants through increased rents, rather than upfront costs.

“In addition to the repercussions of the Tenant Fees Act, the proposed abolition of Section 21, coupled with the Mayor of London’s recent call for rent controls, will only cause the sector to shrink further.

“In turn this will increase pressure on the sector because it will discourage new landlords from investing in the market, causing rents to rise for tenants as less rental accommodation is available.”

Separately, haart has reported rental supply down by 19% last month compared with July 2018, and in London, down by 37%.

It says rents have risen by 7% in London.

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15 Comments

  1. mmmm

    Shock horror!

    possibly the most obvious unintended consequence of new legislation ever…

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  2. jeremy1960

    No **** sherlock!

    Will Westminster take any notice at all? No of course not because it doesn’t affect any of our so called representatives. They live in the bubble that is Westminster,  we pay their salaries,  their expenses and their pensions, what do they have to worry about?

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  3. Spare Room

    What are we at now?… 20 Housing ministers in the past 20 years. I’m sure the next one will get it right 😉

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  4. A Gent

    Not sure what to make of this story because there aren’t any actual £ figures in it.

    “In turn this will increase pressure on the sector because it will discourage new landlords from investing in the market, causing rents to rise for tenants as less rental accommodation is available.”

    I see this view expressed a lot, but it doesn’t make sense to me either. If a landlord doesn’t buy a particular property and a FTB does instead, then the pool of renters shrinks at the same rate as the amount of property available to rent. Net effect on rents should therefore be zero?

    Same is true if a landlord sells up – they either sell to another landlord, in which case the amount of rental property stays the same, or they sell to a FTBer – in which case the number of renters drops at the same rate as the number of properties to rent.

    A simple bit of supply and demand for a Thursday morning. Happy for anyone to prove this simplistic bit of analysis wrong.

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    1. Home Provider

      That is a false claim that is made by the organisation that calls itself Generation Rent.  See https://www.property118.com/generation-rent-tries-hoodwink-policymakers/
      or google Generation Rent tries to hoodwink policymakers
      Further reasons are given in the comments, like landlords switching to furnished holiday accommodation or to using airbnb, and sales to buyers of second homes where there is no chain for first time buyer to be at the end of.

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    2. GeorgeHammond78

      A Gent, your argument would be fine if not for the fact that the population is growing exponentially bringing a continued net surge in rental requirement. Absent both zero deposit mortgages and housebuilding keeping up with population growth, young adults will always rent first, buy second. And, once paying rent it takes a heck of a lot longer to save the required deposit, especially if rents rise as predicted as the net per capita supply of rental housing stock declines.

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    3. JMK

      Your argument seems to be completely based on FTB activity and makes the assumption that this group competes directly and 100% with landlords.  This is obviously not the case.

      Landlords provide a wide variety of accommodation and if they withdraw from, say the 4 bed family home market, it has little impact on FTBs but certainly will on families looking for such a home.

      In fact the overlap of landlords competing with FTBs is extremely small and is further skewed through HTB.

      You also ignore the enormous impact that landlords have had on the creation of new homes/ conversions/ renovations of disused stock.  One EHS report puts BTL as responsible for a staggering 83% of additions to usable housing.  This activity will decrease and thus increase pressure on rental prices.

      And of course the previous posters make valid points too.

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    4. singlelayer

      If I recall, a Government report (within the last couple of years), discovered they’d previously completely omitted two groups that are responsible for purchasing property from exiting landlords from their study…divorcees who having been a single household, now require two homes and 30-somethings still residing with parents. Neither show up in the total number of existing tenants, yet significantly contribute to the purchase of properties that were previously part of the private rental stock. Number of tenants remains (at least) the same; number of PRS properties available to rent goes down. It’s not a straightforward one-out/one-in between LLs & FTBs. And even if it were, the bulk of FTBs can only afford up to a certain amount, whereas LLs hold many properties far beyond FTBs’ reach. That may indeed have an impact down-chain, but the more transaction involved at ever decreasing prices, the more chance one of the two groups above (or any others) snap these up. It really would be interesting to see who got the blame once every property was owner-occupied, yet there were still millions of tenants looking for somewhere to live. Whose fault would it be?

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    5. Deltic2130

      Oh dear, A Gent! You really have fallen for the anti-landlord tripe haven’t you? Your simplistic argument makes no sense because it depends on the rental market being a fixed size, zero-sum game, which it isn’t. To say that a FTB would have been a renter isn’t necessarily true, and to say a FTB buying reduces the rental market by one also isn’t true. What’s this?? A married couple in owner-occupation is getting divorced you say? Hang on, that means possible new entrants to the rental market then! And wait a moment – that FTB may have just bought a house and not need to rent, but here’s a new immigrant family just arrived and looking for a rental home! Ooh, hang on, the phone’s ringing… yes, that was a couple of former owners wanting to check out a new school area before making their next purchase! So you see, you can run back to The Guardian forums and the HPC website and explain how their basic, simplistic thinking is a bit… well… thick.

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  5. DASH94

    The phraseology is a bit inflammatory there. ‘Hike their rents up’ implies that it’s a knee-jerk punishing move.    Any  sensible landlord will look at imposing regular and standard rent increases if his costs go up.

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  6. HIT MAN

    Woopy do Happy Days… we are making loads more commission now we have increased the rents following other agents in our area, we never charged high fees so it’s a win win situation for us. I’d like to say a big thank you to all the corporates Agent especially the london based who have been milking it for years, you’ve made me a very happy person.

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  7. Gromit

    Note for politicians for the future:

    Night follows day.

    Example 1: put up fuel duty by 1p per litre, what happens to the price at the pumps?

    Example 2: increase taxes and/or costs on Landlords, what happens to rents? (and supply?)

     

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  8. Apropos- Renting Done Right

    IT’S NOT AS BAD AS YOU THINK! As an agent in Scotland with over 4,000 properties under management, I would wish to reassure everyone in England that the implications of the fee ban are not as bad as some may think at this stage. We went through the same process in Scotland 7 years ago and felt equally resentful at the time. We now realise that this restructuring of how tenants are charged by spreading costs over the term of a tenancy is much fairer for everyone. Yes, rents here went up, but by collecting small, increased amounts over the term of a lease it is far less punitive for tenants who no longer face huge up-front costs at an already costly & stressful juncture. The landlord now pays for ALL the services their agent provides them, which is how it should be, and the tenant pays an appropriate rent to ensure landlords still maintain their margins. We believe now, that prior to 2012, we were effectively charging tenants for services which the landlord should have been paying for, and as such, landlords didn’t need to charge quite so much rent to ensure it was profitable for them. Tenants who stay for the longest periods could now end up paying more in the long term, but they are also benefiting from the very fact that they are long term tenants, with secure and stable housing. I think that’s a price worth paying for, providing landlords in England don’t react by increasing rents disproportionately. We now have a fully regulated PRS in Scotland which has had enormous and costly implications on how we deliver our service, but now that the dust has settled, and good old fashioned supply & demand economics have been allowed to take effect, rents have found their level, and the sky hasn’t fallen down.

    The tenant fee ban is just the start of major reform which is going to happen across the English PRS, but I hope Scotland can offer some reassurance and guidance to our counterparts south of the border. We all fear change, and it will cause some pain during transition, but progress is impossible without change, and those who don’t change their minds, change nothing. It will all be fine in the long run as demand for rented accommodation is only going to continue to increase over the decades ahead. As long as there is demand, someone will supply that demand, but it may be a different breed of landlords.

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  9. Mark Walker 2

    Addendum.

    Tenant fees don’t seem to have gone away entirely.  I am not talking about the agent in town who is still advertising application fees on their website.  We still have loads of applicants who apply for a property and pay the one week’s reservation fee and then do a complete disappearing act.  That is a pain of the legislation for other tenants in waiting and landlords that have to wait as the property had to be taken off the market when the reservation was paid, then re-advertised at a later date.

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  10. Woodentop

    So who has the data to prove new rental properties stock is on the increase? I see nothing but less stock and next to no-one new as landlords even considering getting into rentals. Landlords have been hammered in recent years by Government clowns and is to get worse with abolition of AST’s and evicting bad tenants.

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