Since the introduction of the tenant’s fees ban in England in June there’s been a boost in the number of new tenancy applications, but rents have been rising as landlords are unwilling or unable to absorb the extra costs.
The tent fees ban means that letting agents are unable to charge their administrative costs to tenants by way of tenant fees, and deposit amounts are capped at the equivalent of 5 weeks’ rent, so inevitably these costs are passed on to landlords.
Some landlords are willing to absorb the extra costs, or if they manage the properties themselves they may not even charge tenant fees, but otherwise most landlords are passing on the extra costs by way of rent increases.
The upshot is that tenants are no longer asked to provide high fees in addition to their capped security deposit, but the cost will be spread out over a period by way of a slightly higher rent – still a benefit for most tenants.
The trend has been reported by letting agency franchise group, Belvior stating that they have seen a dramatic increase in the number of applications since the fees ban came into force, with their July applications up 32% on July 2018.
Both Belvoir and ARLA Propertymark are reporting rent rises across England, Wales and Scotland, Belvoir stating by an average of just over 4.5% compared with the same period in 2018.
Bevoir CEO Dorian Gonsalves has said that Belvoir offices reported high demand, at a time of reduced supply due to other regulatory changes.
David Cox, Chief Executive of ARLA Propertymark, has said:
“Following the Tenant Fees Act coming into force in June, rents have continued to rise, which we believed would happen,”
“The fees agents have been banned from charging are still being paid for by tenants, however it’s now through their rent, rather than upfront costs.
“The fall in the number of properties available further increases competition in the market, which only pushes rents up or forces landlords to exit the market entirely. As the sector faces increased levels of legislation, it’s evident this is putting even more pressure on the industry.”
Dorian Gonsalves od Belvoir has said:
“The majority of Belvoir agents predict further rental increases.”
“As uncertainty over Brexit continues, and tenant demand increases, we hope that the Government will consider a more joined-up and holistic approach to the rental sector, which will help to increase the supply of properties introduced to the market.”
“During the past 11 years average London rents have increased by about 4.8% per year. This increase is ahead of average inflation of 3%, but, being a capital city with affluent individuals seeking accommodation, and a market that is experiencing stock shortages, the rise is inevitable.
“Outside London, average monthly rents range from £629 and £638 in the north-east and north-west respectively, £771 in East Anglia and £783 in the west midlands, through to £1,155 in the south-east.”