London landlords reacted angrily today to a planned ban on up-front letting agent fees that cost renters hundreds of pounds before they move into a new home.
They branded it “draconian” and “a quick fix” that would “boomerang” by pushing rents higher in the long run.
London renters stand to gain most from the Chancellor’s move because fees are highest in the capital. A third of private sector tenants in London have to stump up £300, while one in six pay more than £400.
Embarrassingly, minister for London Gavin Barwell, who is also the housing minister, attacked the policy as a “bad idea” just two months ago when it was pushed by Green Party MP Caroline Lucas. He tweeted: “Landlords would pass cost to tenants via rent.”
Today he confirmed the change of mind, telling the Evening Standard the Government was concerned about “the affordability of renting” and up-front fees in particular. “These costs can be hard to meet for people who are just about managing,” he said.
Industry figures claimed that Mr Barwell had been right the first time. David Cox, of the Association of Residential Letting Agents, said: “A ban is a draconian measure, and will have a profoundly negative impact on the rental market.
"This decision is a crowd-pleaser, which will not help renters in the long term.” ARLA said fees were a “reasonable” £202 on average.
Richard Lambert, chief executive officer at the National Landlords’ Association, agreed that “some unscrupulous agents have got away with excessive fees and double-charging landlords and tenants for far too long”.
But he said the Chancellor’s move would backfire on tenants. “It will boomerang back on them,” he claimed. “Agents will have no other option than to shift the fees on to landlords... [which] will only push more towards increasing rents.”
Richard Price, executive director at the UK Association of Letting Agents, said: “Arbitrary bans sound appealing as a quick fix, but the problem of affordability cannot be addressed by preventing legitimate businesses from charging for their services.
“A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be... higher rents.”
Government officials argued that scrapping fees would curb rents in the long run. They said upfront fees stifled competition because once tenants choose a property they have little choice over whether or not to pay, and cannot shop around for a better deal.
However, landlords can choose which letting agent to use, which means they can grab the best deal. Scrapping fees would mean stronger competition, ultimately helping to push down costs.
The English Housing Survey found average fees across the UK were £223 and surged by 60 per cent between 2009-10 and 2014-15. But unofficial estimates claim they are higher. Citizens Advice found they averaged £337 and pressure group Shelter found one in seven paid more than £500.
Campbell Robb, chief executive of Shelter, said: “Millions of renters in England have felt the financial strain of unfair letting agent fees for far too long, so we’re delighted with the Government’s decision to ban them.”
Mayor Sadiq Khan welcomed the fees ban proposal but warned that millions would struggle with their mortgages as inflation soared after the Brexit vote.