How much will Hammond's fees ban harm letting agents?

Renters may benefit a little but the market will remain fiercely competitive.

Last Updated: 07 Dec 2016

I've just moved to a flat overlooking a branch of Foxtons, that most dreaded of letting and estate agents, in south London. When I left this morning they were already opening up. When I got home in the dark of yesterday evening a contingent of well turned out young people were still there, hammering the phones and doing paperwork.

It's a reflection of the competitive nature of the housing market, where top sellers are lauded with awards ceremonies and poor performers are soon shown the door in short time. There's a fine line between being tenacious and being duplicitous, and their competitive nature has quite reasonably earned estate and letting agents a reputation as shysters.

So it's easy to see why the chancellor Philip Hammond will turn his crosshairs on the likes of Foxtons in his inaugural autumn statement today. Leaked plans have show he intends to ban all the fees that letting agents ask of tenants, which normally run into the hundreds of pounds.  It's a politically smart thing to do - few will shed any tears over the damage to Foxtons' margins and its share price, down around 10% today at time of publishing. And it ties in nicely with the government's new narrative of supporting those who are 'just about managing'.

Read more: Time to show estate agents the door?

But will it good for tenants? The National Landlords Association and UK Association of Letting Agents have reasonably suggested that rather than giving up on the lost revenue, agents will simply increase the fees they charge landlords - and rents will therefore increase. Embarrassingly, the government’s own housing minister poo-pooed the idea of a ban only two months ago, on those very grounds.

That's surely true in part, but it won't necessarily cancel out the financial benefits. Landlords may not stand for such big increases and look to let their homes via other means. Unlike in home sales, it's not all that difficult for houses to be let without the help of agents, and a new breed of digital operators has made it even easier. According to the housing charity Shelter rent rises in Scotland, which banned fees in 2012, have been ‘small and short-lived’.

And the ban will also bring more transparency to the market. Currently fees are often sprung on tenants when they've already got their hearts set on a new pad. A clearer picture of what they will have to pay up front will make it easier for them to choose and therefore in theory make the market more efficient.

But don't expect letting agents to suddenly become wholesome and responsible members of society. Their market remains just as fierce and a continued shortage of supply will ensure that remains so. Like all of his predecessors Hammond will pledge to increase spending on affordable homes but it will take a long time for the effect of that to be felt.

Image source: AP Monblat/Wikimedia


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