ARLA Report on Letting Agent’s Fees
Households are being hit with letting fees up to £800 when renting a home, with the average at just over £400, according to ARLA Propertymark (Association of Residential Letting Agents). The issue of letting agency fees has been highlighted by campaign group Generation Rent shortly before the close of a consultation on government proposals to ban letting fees for tenants.
Capital Economics was commissioned by ARLA to produce a report looking into the impact of the proposed letting agent fees ban on landlords, letting agents, households, the buy-to-let sector and the wider economy. There are a number of estimates of the average fees charged by letting agents to tenants. However, lettingfees.co.uk which looks at fees quoted by 902 letting agents across the United Kingdom – and is the one based on the widest sample across the market – finds that for a simple contract for two tenants, average fees total £412. Capital Economics calculate that the total revenue from fees charged to tenants is around £0.7 billion for letting agents in England and Wales annually. Based on those estimates for turnover in the residential lettings sector, this means that around a fifth of turnover is at risk if a ban on all letting agent fees is drawn into law.
Other key findings are: • Total turnover in the residential lettings sector in England and Wales is around £4 billion and it employs around 58,000 workers • Residential lettings activity is localised with at least 2,000 jobs supported in each region • The introduction of a ban on letting agent fees charged to tenants would be the third hit to buy-to-let activity in recent years, which exacerbates downside risks to the private rented sector, wider property market and economy as a whole • Fees charged for letting activities reflect real work to be undertaken and therefore, if the ban on fees goes ahead, the costs will need to be recovered • On a comparable basis, fees for letting a property are lower than buying a house in the United Kingdom, while they are also lower than in some other major economies • Landlords are likely to pass on higher agents’ fees to tenants in the form of higher rent. In the most plausible outcome, letting agents lose £0.2 billion in turnover, landlords lose £0.3 billion in income and tenants pay an increased rent of £103 per annum • The impact on letting agents is likely to result in a loss of jobs to the tune of 4,000 workers • Although renters will benefit from a reduction in up-front fees, most of this will be passed back to them through increased rents; those tenants who move more frequently will enjoy a saving on overall costs but those who do so less frequently (which are likely to be lower income families) will see a loss.
Letting the Market Down? Full report: http://www.arla.co.uk/media/1045728/letting-the-market-down-assessing-the-economic-impacts-of-the-proposed-ban-on-letting-agents-fees.pdf