Autumn Statement 2016 ban on letting fees announced – but could this push up rents?
LETTING agent fees will be banned under measures set to be announced in today's Autumn Statement.
Chancellor Philip Hammond announced the new rules during his first-ever speech, with the finer details being nailed down in the next few months.
Agent fees have risen to unaffordable levels over the past few years, according to Citizens Advice.
In September, it said that fees had gone up from an average of £125 in 2009/10 to £200 in 2014/15 - although sometimes they were as much as £700 per person.
Gillian Guy, chief executive of Citizens Advice, said: “Renters will be hundreds of pounds better off thanks to the ban on letting agent fees.
“Fees have gone up 60 per cent in the last 5 years. People are paying over £300 to letting agents for what is often basic administration, such as checking references and running credit checks.
“This change will help the 4.8 million households who now rent from a private landlord - 1.5 million of whom are families with children. ”
The government is also announced a rise in the National Living Wage by 30p an hour to £7.50 from next April.
How will the ban on letting fees work?
The details are yet to be announced but speculation says that there will be a ban on upfront fees from agents to tenants.
There will be a consultation later this year before plans are finalised.
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Will the new rules push up rents?
Agents say that by banning these fees they will push the costs onto landlords.
This means that in time these costs will be felt by tenants, even though this will be spread over duration of the rental contracts rather than as an up-front cost.
Key points from the Autumn Statement
Here are the Chancellor's proposed changes
National Living Wage increase National Living Wage rises by 30p an hour giving £500 more a year to lowest paid Brits
Rip-off rental fees banned
Share prices of estate agents crashed this morning ahead of Philip Hammond's crack-down on fees
£3.5bn housing investment
Government to inject £1.4bn into affordable housing and another £2.3bn into areas of 'high demand'
U-turn on cuts to Universal Credits
Cash back for three million workers as Chancellor reverses cuts to benefits
Fuel duty frozen for another two years
The Chancellor won't implement the planned 2p-per-litre rise
£1.1bn investment into super-fast internet
The money will fund 5G mobile networks and extension of fibre-optic broadband networks
Income tax-free personal allowance to rise
The tax-free personal allowance will rise £1,500 to £12,500
New NS&I savings bond announced
NS&I to launch new savings bond with a rate of 2.2%from Spring next year
Insurance premiums to increase
Insurance premiums to go up after Chancellor announces two per cent hike in tax
David Cox, managing director of the Association of Residential Letting Agents (ARLA) said: “A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market.
“Most letting agents do not profit from fees. Our research shows that the average fee charged by ARLA Licenced agents is £202 per tenant, which we think is fair, reasonable and far from exploitative for the service tenants receive."
Alan Ward, chairman of the Residential Landlords Association, said: "This will not help tenants, especially those who are ‘just managing’.
"Agents’ fees have to be paid by somebody. If any extra fees are passed on to landlords, tenants will end up paying them forever as market rents will increase."
In September, even the housing minister, conservative MP Gavin Barwell said that rents could push up prices. He said in a tweet: "Bad idea - landlords would pass cost to tenants via rent. We're looking at other ways to cut upfront costs & raise standards"
How a ban on fees didn't increase rent in Scotland
Letting fees are illegal in Scotland since a ruling in 2012 which ordered that tenants can pay for deposit and rent, with any other charges should be footed by the landlord.
The charity Shelter claims that rents in Scotland have not risen more that any other comparable part of the UK, since the ruling.
Its research found 59 per cent of agents reported no change, while one landlord in 120 said they noticed an increase in fees.
Matt Hutchinson, from Spareroom.co.uk, said: “In Scotland, it hasn’t led to an increase in rental prices. What it might do is force more competition between agents.
“Landlords will be able to shop around to find the best agent for their property. The fees that they are charged will obviously be a consideration and this might level out the playing field.
“The problem for tenants is that they don’t get to choose their fees - but landlords do.”
What are the rules at the moment?
Letting agents are able to charge fees on top of rent and a tenancy deposit but they must publish the full details on their websites, display them in their offices and make them clear to renters.
These rules were introduced in May last year and it means letting agents must explain how the fee is calculated.
Property listing websites - like Rightmove and Zoopla - are exempt from these requirements, as are local councils helping tenants find private rented homes.
What do letting agents charge renters fees for?
These fees vary between letting agents but typically they will charge fees for administration, references, changing contract, inventory checking, contract renewals and chasing of late payments.
We took a look at how fees vary between four of the biggest agents - for an in-depth look read our guide.
For example, Foxtons charges a £420 for admin, £165 for an inventory check at the end of the tenancy, we well as £65 for renewing a tenancy or £300 to change the contract mid-term.
It you forget to pay your rent then you’ll get whacked with a £60 fee and any future references will incur a £60 charge.
Whereas Hampton’s charges £250 for admin, £25 for right to rent, £135.80 for inventory checks.
If contracts need changing then it’s £420 for the pleasure. While tenant references cost £30, so do late payment fees.
If you want to renew you’ll be charged £90 for drawing up the changes and further £150 for renewing the contract.
While Ludlow Thompson charges a £420 admin fee, you’ll pay £432 to change names on a contract or £114 to renew it.
Inventory costs £114.40, references £36 and late payments fees are the same amount.
A spokesperson from Foxtons said: "This was an unexpected announcement and the details and timing of the new policy are not yet known. As we get more clarity, we will review the impact to our customers and on our business."
Have you ever been charged a rip-off letting fee? Tell us your story! Email: Tara.Evans@the-sun.co.uk
