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Long-term tenants hit hardest by letting agent fee ban

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Written by: Christina Hoghton
29/03/2017
Tenants who stay in properties the longest will be hit hardest by the government’s proposed ban on letting agent fees, according to the Association of Residential Letting Agents (ARLA).

In research conducted in partnership with Capital Economics, the trade organisation found that tenants will face extra costs of hundreds of pounds as a result of the ban.

Chancellor Philip Hammond banned all upfront letting fees charged to tenants during his Autumn Statement last November, although the ban has not yet come into force.

Rents to rise

Letting agent fees account for around a fifth of letting agents’ revenues, said ARLA. If they are banned outright, agents will need to pass the costs on to landlords through higher agents’ fees.

Two in five landlords (41%) expect they will need to pass on a portion of the inflated cost to tenants, and the research finds they will most likely push rents up by £103 on average per year. If landlords were to pass on the entire uplift in agents’ fees, tenants would be hit harder, typically seeing rent increases of £275 a year.

Long-term disadvantage

This will hit long-term tenants the hardest. Based on an average rent increase of £103, those in tenancies 10 years or more will lose out by £755, ARLA estimated.

However, those who move every six months will pocket £4,463 over a 10-year period.

David Cox, chief executive of the organisation, said: “For many tenants, buying a property simply isn’t an option, and they must depend on the private rented sector to provide security, good standards and fundamentally, a home.

“Our findings show that landlords are likely to raise rents as a result of the ban on fees. Those tenants who move least frequently, which tend to be lower income families, will be worst hit by rent rises. This is ironic and shows that there will be unintended consequences to what, in effect, is a crowd-pleasing, populist policy.”

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