The Chancellor Philip Hammond today delivered his first Autumn Statement, which included a number of measures for the property industry.
The headline-grabbing story is that the Government is seeking to ban letting agent fees charged to tenants in England and Wales 'as soon as possible'.
News of the intention to ban fees broke the night before the Chancellor's public address and the majority of the lettings industry has reacted negatively to the Government’s plans.
A ban on fees charged to tenants by letting agents represents a change in direction from the Conservative Party. The Prime Minister, Theresa May, has voted against a ban on fees on two previous occasions, while the Housing Minister, Gavin Barwell, tweeted in September that a ban was a ‘bad idea’ and that there are ‘other ways’ to cut costs and raise standards in the rental sector.
It is now thought that the Government will consult on a ban before announcing its exact intentions. It's not yet clear whether the ban will cover all fees or specific fees.
The Government estimates that a ban will impact almost five million tenants across England, saving the typical tenant around £300 at the start of every tenancy.
While confirming the changes to the way letting agents can charge fees, the Chancellor said: "Landlords appoint letting agents and landlords should meet their fees."
He said 'unregulated fees' have spiralled into hundreds of pounds and that this is 'wrong'.
There have been numerous campaigns for a ban on fees, the most recent being the Renters' Rights Bill, which is currently moving through Parliament but will now be heavily amended to reflect today's announcements.
Industry trade bodies have called for a cap on fees charged to tenants, rather than a blanket ban and have now raised their concerns that renters will still be hit with agents' charges but in the form of higher rents charged by landlords.
A number of property market commentators, agents and industry bodies have had their say on the proposed ban, here is a round-up of some of their comments:
Steve Bolton, Founder of Platinum Property Partners
“Tenants have been paying extortionate fees to some letting agents for some time, so any measures introduced to save them this cost is fair and welcome. But shifting this cost to landlords will only put more pressure on the private rental sector and potentially increase rents for tenants in the long-term."
“Many landlords who are currently hands-off will probably take over the management of their tenants and property portfolios themselves in a bid to save costs. This will require landlords to get educated on what it takes to legally and efficiently manage a portfolio and tenants.”
Isobel Thomson, CEO of the National Approved Letting Scheme
"Given the rhetoric around excessive letting agent fees, today's announcement is perhaps of little surprise. We don't believe banning fees is the answer. The majority of letting agents’ fees are fair and reasonable and charged for the service they provide.
"Unfortunately, by banning, many of these fees will still be passed on, but in other ways. It will not give give renters 'greater clarity and control over what they will pay' as suggested by the Chancellor."
David Westgate, Group Chief Executive of Andrews
“We, of course, welcome transparency around fees and honesty in terms of cost vs margins and have witnessed some outrageous charges by others within the industry."
“It is essential that the interests of all parties – tenants, landlords and agents alike - are protected and to this end we would welcome the opportunity to get involved in the consultation process that will manage the way this change is handled.”
Jeff Doble, Chief Executive of Dexters estate agents
"Whilst we await the exact detail of the legislation we broadly welcome the Government's action on this."
"We would prefer to see compulsory regulation of letting agents but this is a step in the right direction, as it will lead to more transparency and make life difficult for rogue estate agents."
John Midgley, Managing Director of Touchstone
"Government has created a crowd pleaser, but this will cause uncertainty and confusion in the lettings industry, most of whom charge reasonable fees and recognise that the cost of entry into a rented property needs to be fair and transparent."
"The Chancellor seems to have jumped on the bandwagon which presumes that tenant fees are income which simply improves an agent's profits. This is simply untrue. Agents are required to carry out an increasing amount of administration in respect of tenancies, such as compliance with deposit protection schemes and carrying out Right to Rent checks - both legislative requirements incurring additional costs for agents."
The other housing measures in Hammond's Autumn Statement largely revolved around the provision of new homes and affordable housing. There will be:
- a £2.3 billion Housing Infrastructure Fund, which will aim to assist in the development of up to 100,000 new properties in areas with high demand;
- a further £1.4 billion put aside in order support the delivery of 40,000 affordable homes;
- relaxation of restrictions on Government grant so that a wider range of housing types can be provided;
- continued support for the Help to Buy: Equity Loan scheme and the Help to Buy ISA;
- implementation of a large-scale regional pilot of Right to Buy for Housing Association tenants;
- an additional £3 billion fund set aside for 90,000 affordable homes in London.
At the end of his first Autumn Statement address, Hammond also noted that it would in fact be his last. The Chancellor has abolished the Autumn Statement going forward. From Autumn 2017 there will now be just one annual Budget.