As the dust settled on Philip Hammond’s first Autumn Budget Statement as Chancellor of the Exchequer, those in the property market reflect on two substantial measures designed to improve the lot of homeowners and renters alike.
Firstly, the announcement of a £1.4 billion funding injection for house building, aimed at delivering up to 40,000 new homes across the UK. Meanwhile a relaxation of how existing affordable housing funding can be used will help to diversify our housing mix, creating the homes that people want and need.
Mark Hayward, Managing Director, National Association of Estate Agents (NAEA), comments, “The creation of 40,000 new homes that this new funding is expected to deliver is still painfully short of the number of affordable homes we need to solve the housing crisis and get first time buyers on the housing ladder. We hope that the Government will announce an intent to do much more when it releases a widely expected White Paper at the Autumn Statement today. It is vital that the Government uses this to signal a radical rethink in its housing strategy and consider measures such as building homes on unused Green Belt land to really kick start the house building boom we badly need.”
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The government is also set to announce a ban on letting agent fees for renters, making those entering the private rented sector are no longer liable for upfront fees from agents. While on the surface this is great news for renters, agents are not so pleased and warn that tenants may still face the same costs in different forms.
David Cox, Managing Director, Association of Residential Letting Agents (ARLA), comments this measure, “A ban on letting agent fees is a draconian measure, and will have a profoundly negative impact on the rental market. It will be the fourth assault on the sector in just over a year, and do little to help cash-poor renters save enough to get on the housing ladder. This decision is a crowd-pleaser, which will not help renters in the long-term. All of the implications need to be taken into account.
“Most letting agents do not profit from fees. Our research shows that the average fee charged by ARLA Licenced agents is £202 per tenant, which we think is fair, reasonable and far from exploitative for the service tenants receive.
“These costs enable agents to carry out various critical checks on tenants before letting ta property. If fees are banned, these costs will be passed on to landlords, who will need to recoup the costs elsewhere, inevitably through higher rents. The banning of fees will end up hurting the most, the very people the government intends on helping the most.”
Commenting on the Autumn Statement, Richard Lambert, Chief Executive Officer at the National Landlords Association (NLA), said:
“The new Chancellor is clearly aware of the pressures facing those living in the private-rented sector, but in attempting to improve affordability he has shown that, like his predecessor, he lacks an understanding of how the whole sector works.11
“There’s no doubt that some unscrupulous agents have got away with excessive fees and double-charging landlords and tenants for far too long. Banning letting agent fees will be welcomed by private tenants, at least in the short-term, because they won’t realise that it will boomerang back on them.
“Agents will have no other option than to shift the fees on to landlords, which many will argue is more appropriate, since the landlord employs the agent. But adding to landlords’ costs, on top of restricting their ability to deduct their business costs from their taxable income, will only push more towards increasing rents”.
Richard Price, Executive Director at the UK Association of Letting Agents (UKALA) said, “Arbitrary bans sound appealing as a quick fix, but the problem of affordability in the private-rented cannot be addressed by preventing legitimate businesses from charging for their services.
“A ban on agent fees may prevent tenants from receiving a bill at the start of the tenancy, but the unavoidable outcome will be an increase in the proportion of costs which will be met by landlords, which in turn will be passed on to tenants through higher rents.
“UKALA agents strive to provide a premium service which represents excellent value for money and this ban will place in jeopardy hundreds of professional businesses in order to deal with the few unscrupulous”.
Meanwhile, Shares in some of Britain’s biggest estate agencies fell sharply on Wednesday on the expectation of the measures.
Roughly £50m was wiped off the combined value of Foxtons and Countrywide as Philip Hammond prepared to announce a clampdown to prevent tenants from being forced to pay administrative costs for simple things such as inventory and reference checks.
The move by Hammond to ban letting fees is likely to form part of a broader package of measures aimed at helping Britain’s so-called “Jams” those families “just about managing”.
