The populist and catchy line reads “Fancy being £500 richer next time you move home? Get your MP to ban letting agent fees.” Generation Rent are teaming up with Labour to fight rogue letting agents.
Led by former Labour PPC Alex Hilton, Generation Rent lobbies on behalf of private renters for decent and affordable homes. So far, so sensible.
Their latest campaign, a fairly slick one at that, is aiming to ban the vast majority of letting agents’ fees by lobbying MPs to vote in favour of a Labour Party amendment on the Consumer Rights Bill. This campaign follows a so far unsuccessful petition – just 58 signatures – calling for a mandatory national register of landlords; an embarrassingly ill-thought out piece of unnecessary bureaucracy that I hope dies like a fish in a desert.
Fortunately, the amendment was voted down by a majority of 53 (281 to 228) after the Coalition fell in to line. In my opinion, this is a good thing and here is why.
Red Ed’s leftward lurch staggers on and now it is landlords and letting agents under fire; Labour have set out plans for drastic reforms to the rental sector that include capping rent increases once a tenancy has been agreed, introducing three-year tenancies as standard and stopping letting agencies from charging tenants simply for the signing of a rental agreement.
In essence, this is yet another attempt by Labour to woo voters by promising to magic away the costs of life by interfering with markets and private companies. Like Labour’s promise to freeze energy prices, this carrot would have fallen, grated at the altar of reality; the costs will be transferred elsewhere, more likely than not to the landlords. As a landlord, I am inclined to vote against renters’ Christmas.
For the first time since we started taking note, the number of private renters has surpassed those in social housing, standing at around nine million across the UK. There is no doubt that letting agents’ fees are deeply unpopular, with landlords as well as renters. Private renters can pay charges covering administration, the mandatory professional inventory, references, guarantors, deposit protection, maintenance charges and credit checks. On average these total around £150 although anecdotal evidence suggests costs can reach far higher. This is a lot of money to most people and, in my opinion, extortion. The practice of charging renters for running credit checks and constructing an inventory does make sense, both require time and action, but in reality letting agents are charging renters to undertake the admin that is an integral part of their job. It is worse for landlords; a few months ago I had reason to ask a tenant of mine to vacate with the standard three months’ notice period (a Section 21). I was charged £75 for the privilege of sending a letter. This is, of course, in addition to the hefty percentage letting agents take out of each month’s rent cheque for “managing” the property before it reaches the landlord at all.
The vast majority of landlords (88%, myself included) rent out less than three properties with 72% renting out just one; we are not talking about a few huge, evil corporations sucking the life blood of vulnerable people, although Generation Rent’s position is clear: “a major contributor (to the cost of living crisis).. is the high cost of rents…. (this is) money that would otherwise support diverse sectors of the UK economy (but) is being hoarded by landlords.” I’m sorry – hoarded? Landlords no more “hoard” their rental income than a banker, doctor or retail worker hoards their incomes; I use it to live, pay other landlords, participate in the economy, pay taxes etc. The campaign would have more gravitas if it could keep its rhetoric a little less, well, Communist. Alex Hilton is no Henry George.
The Generation Rent campaign, backed by Stella Creasy MP, tries to appeal to free marketeers:
“By banning letting agent fees to tenants, less money will go to agents, that’s true. But landlords should expect lower costs and a better service as the effects play out. And more professional agents will be of benefit to tenants beyond the absence of exploitative fees. In fact, if this were implemented quickly and the market effects on agents flowed through quickly, that could radically undermine the case for mandatory licensing of letting agents.
This is such a classic market solution to a social problem that I’m surprised it’s not Conservative policy.”
But they do not substantiate their points.
Why should landlords expect lower costs and a better service because letting agents are banned from imposing hidden costs on their tenants? Letting agents are not required to tell landlords what charges they impose or when. The Labour proposals will make life substantially more difficult for landlords, the mandatory 3 year rental contracts in particular. No landlord wants to undergo the hassle and expense of kicking out tenants which is undoubtedly unsettling for the renters and their dependents but three years is a long time, situations change. It is the nature of the beast.
Renters do not have a monopoly on letting agents’ fees; most landlords resent that 10% siphoned off each month just as their tenants would rather not pay every time they move house. But, we live in such a service driven economy, the recruitment industry serves as a prime example, that a niche has been created. Ideally, the rise of Zoopla, Rightmove and other property portals will see an increase in one-to-one, landlord-to-tenant, exchange. It isn’t difficult to google and print a Short Hold Tenancy Agreement but, as mentioned, most landlords own just 1-3 properties and most likely work too. The legalities and confusion make outsourcing to an agent tempting.
Unless we want to see letting agencies across the country going into administration, further stagnating the housing and rental markets, we need to accept that these costs, that form a large part of some agencies’ revenue, will be displaced rather than disappear despite the best intentions of Labour and Generation Rent. More likely than not these costs will be transferred to the landlords, the subject for another rant (I’m aware this is turning into an essay). Fewer agencies will reduce options for renters, entrenching monopolies and cementing renters’ woes.
We seriously need to get the housing market moving and that includes the rental sector too. Imposing arbitrary three-year rental contract is madness; what if the landlord wants to sell the property or live there themselves? Problem tenants are as prevalent as problem letting agents and renters already have a plethora of rights and regulations at their disposal. Of course there are shocking cases of abuses of power and negligence by both landlords and letting agents but Labour and Generation Rent’s proposals are certainly not the answer; rather than professing to believe in the markets, let the market do its jobs Word of mouth travels far; shame the bad agencies and use the protections that consumers already possess. Far more importantly is the market dysfunction we see because there are far higher levels of demand than there is a supply of housing to meet this demand. In the case of housing, demand is so high as to price those on modest and even average earnings out, placing further pressure on the taxpayer to pick up the bill. We desperately need to build more houses.
If Generation Rent and politicians across the spectrum are truly concerned for renters they should focus on increasing the housing supply. We need to build more and relaxing planning regulations, encouraging renovations of brown field sites through tax breaks and continuation of schemes such as “Help to Buy” would be a solid start.
Hilton is not entirely off the mark in suggesting that people are not forced into food banks by the price of food but by the cost of housing, but direct intervention will not make costs go away, it will reroute them back at the renter or shift them on to the landlord. If Generation Rent are serious about tackling the “cost of living crisis” – letting their Labour credentials slip out there – they should focus on their campaign to tackle fuel poverty. There are an estimated 7 million people currently in fuel poverty, many of whom are in the private rented sector. GR are a member of the Energy Bill Revolution that aims to target energy efficiency; this is not a bad start, but if we are concerned about reducing households’ costs in the immediate term, a certain way to do so would be to cut Green taxes. Green taxes add an estimated 11% to the average household’s yearly energy bills, rising to 15-21% for businesses, an impact that is expected to increase to 23-26% by 2020. As in every sector of public life, whether it be energy, fuel or VAT, tax cuts are the answer, not government intervention. Limit the state and let the market weed out the rogue letting agents; either way, leave the poor sodding landlords alone. We’re taxed enough already.