Is the rising cost of rent the result of the ban or the outcome of rumor mongering?
Not too long ago, a legislation banning letting agents from charging tenants upfront fees was passed. Its purpose is to lessen the expenses a tenant encounters from the beginning and throughout the duration of a tenancy. Under the Act, tenants are able to see how much an advertised property is actually valued without any hidden cost. The landlord under the Act will be shouldering the upfront fees.
But, the financial respite appears to be short lived. According to letting agents, the prices of property rentals have gone up since the passing of the legislation. Landlords are said to have been jacking up their prices to make up for the cost of the upfront fees. Which doesn’t really come as a surprise, because letting agents have been quite outspoken about their concerns long before the legislation was passed. Their warnings, it seems, have come into fruition.
Independent property agency Linley & Simpson reports that the prices of property rentals have been climbing dramatically since the ban was introduced. Based on the agency’s data, the average year on increase of rentals are at 5.6%, but since the introduction of the ban, the rents have climbed from 4% to 5%. The agency’s CEO, Will Linley, said that the “rising demand and a shortage of new buy-to-let activity – another far-reaching result of the ban – the upward trend in monthly rents is only going to accelerate.”
ARLA Propertymark’s chief executive, David Cox echoes the same sentiment, stating that, “Ever since the Government proposed the ban, we warned that tenants would continue to pay the same amount, but the cost would be passed on to tenants through increased rents, rather than upfront costs.” A report issued by his company says that rents are up 22% from June, a record high.
Regardless the difference in figures, the same views applies among letting agents, the cost of the Tenant Fee Ban will be passed to the landlords who in turn will pass it to the tenants through higher rents.
However, director of campaigns at homeless charity Shelter, Greg Beales, claims that all this talk about the Act raising the rent as “absurd scaremongering”.
According to Beales, “It's absurd to claim that the tenants fee ban has made private rents rocket, when the Government's official statistics show this isn't true.” And that’s even before the introduction of the ban, private rents were on the rise, faster than the current situation.
Beales further states that, “This kind of scaremongering is completely the wrong thing to do.”
So, is the ban causing the rise in rent?
The market has always been governed by the law of supply and demand. Prices as we know it would go up if the demand is high, but the supply is low and vice versa. In the case of the rental market, the number of tenants is growing, but the number of landlords is declining.
A report from the Royal Institution of Chartered Surveyors (RICS) says that the number of new landlords has been on the decline long before the ban was introduced. And that the reason may be because of the tax and regulatory changes since 2016.
Regardless of the reasons, the rents can only go as high as they can before tenants throw the towel in. And if such is the case, landlords might find themselves laden with empty houses.