At Amber Properties, one of the big issues that landlords are talking about at the moment is the change in letting agent fees that are due to come in. This could not only have an impact on their bottom lines and alter the relationship between landlord and agent but could also change things for tenants in Northampton who are looking for a property to rent.
What is the Ban?
In the last Autumn statement by the Chancellor, a ban was introduced on charging tenant fees by letting agents. For those looking to rent a property, these fees cover a range of administrative services such as reviewing references, as well as credit and immigration checks.
These charges will now be pushed onto the landlord. In some areas of the country, tenants are having to find up to £2,000 to pay for these fees (in Northampton it’s between £250 and £500) and Phillip Hammond stated in the Autumn that this would take the pressure off these consumers and make it easier to find a property.
The Impact on Landlords and Tenants in Northampton
One area that has already put in place this measure is Scotland. When banning letting agent fees to tenants was introduced in 2012, there were predictions that landlords would have to pass their extra costs on with rent increases. One year later and the evidence seemed to contradict this. The rises in rents were largely comparable to England and Wales and appeared to be associated more with economic circumstances than the fact that landlords were facing increased costs.
Over the next three years, however, rent increases in Scotland reached around 15%, compared to just over 6% in the East Midlands.
This could well be a big concern for renters in Northamptonshire. The change is due to come in this year and, while there probably won’t be an immediate impact, rents will almost certainly rise to compensate for the costs of landlords taking on the burden of those letting agent fees.
Northampton already has rent rises that are largely below the current rate of inflation which means it’s a reasonably cheap place to live compared to some other areas of the country. If the average cost of letting fees for landlords is going to be about £250 then that could see a 2% of rise in rents on top of normal increases over a 6 or 7-year period up to 2022.
One benefit for tenant is that they don’t have to find a big lump sum of money when they first start to rent. That can mean the market is more open to them, particularly in an area like Northampton, and they can manage their costs a little better. Yes, there will be increases in rent but not to the extent that we’ve seen in other parts of the country.
Landlords should be able to offset the extra charges and continue to maintain their profit margin. The only people it is likely to impact are those letting agents who charge high fees – landlords will be more willing to shop around for a better deal than perhaps tenants were willing to do in the past. This could create the right kind of competition that will also bring those fees down a little more and reduce their impact.
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