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Why did the Autumn Statement 2016 grab the attention of Letting Agents?

It’s nearly been 2 months since Chancellor of the Exchequer, Phillip Hammond, delivered the Autumn Statement 2016, but it still remains a talking point in Letting Agencies throughout the country. Although noteworthy, it isn’t the state of the economy or public spending that has got us talking, it’s Mr Hammond’s proposal to ban letting agents’ fees to tenants as soon as possible.

The government will ban letting agents’ fees to tenants, to improve competition in the private rental market and give renters greater clarity and control over what they will pay. The Department for Communities and Local Government (DCLG) will consult ahead of bringing forward legislation.


So why are agents so aggrieved?

The majority of Letting Agencies charge tenants an upfront fee, the amount charged will depend on the agent and their location. Whilst most agents are fair in their pricing structure, there are a minority which charge excessive amounts.

The lettings industry had recognised the need to address the agents who charged ‘excessive fees’, 1 week prior to the announcement of the Autumn Statement a ‘Fair Fees Forum’ was held by the National Approved Letting Scheme to ‘discuss the issue of upfront letting agents fees, and possible alternatives to an outright ban’.

Unfortunately, the government have overlooked the possibility of a cap on fees and pushed for the outright ban, a ban which will result in a substantial loss of income for the countries Letting Agents.


How could this effect the rental market?

Fortunately we don’t have to look far to see how an outright ban on fees could affect the rental market and lettings industry.

Scotland banned letting fees in 2012. Many felt that Scottish Letting Agents would try to recoup their lost income by charging Landlords more, who in turn would increase the rent on their properties.

A report conducted by Shelter (The housing and homelessness charity) in 2013, a year after the ban of agent fees in Scotland, highlighted that there had been a 1-2% increase in rents. However, it could not be determined whether this was direct effect of the banned fees or an economic factor.

Rents do appear to have risen more in Scotland than in other comparable parts of the UK in 2013; however, most of this rise is explained by economic factors and not related to the clarification of the law on letting fees. The most recent quarterly figures show rents in Scotland are falling. While statistical modelling of rents in the letting agent sector indicates that between 1% and 2% of the rent rises in Scotland in 2013 could, in part, be caused by the law on fees, this is inconclusive, and appears short-lived.Source – Shelter


Reassuringly, in the report the Scottish lettings industry was described as being positively healthy following the ban on agents’ fees;

The majority (59%) of letting agency managers interviewed said that the clarification in the law on fees had had ‘no impact’ on their business, with only 24% saying it had a small negative effect. Not one agency manager interviewed said it had a large negative impact on their business, and 17% considered the change to be positive for their business.


So when will the ban on fees take place?


The announcement at the end of November left a lot of Agents panicking and rethinking their 2017 business plans, however, it looks like the proposed ban will not take place until 2018. Speaking at the National Approved Lettings Scheme conference in London, Rachael Williamson, of the Department for Communities and Local Government, stated:

The DCLG will work with the industry on forming a consultation but said primary legislation would be needed. If a Bill were to go through relatively quickly, a ban could be put in place in April 2018.


My thoughts:

The Autumn Statement has provided a wake-up call to the lettings industry, although we are still unclear on the timescale and the extent to which the government will enforce the ban, at Amber Homes we aim to be prepared.

We are looking to fine tune existing services and also explore alternative income streams. We can take heed from the Letting Agencies of Scotland and with effective planning we are confident the business will continue to grow and the services we provide to tenant and landlords will only get better. 



Jak Gould 
Co-author of Amber Valley Property News