The tenant fees ban could end up saving renters just £138, below the average £200-£300 that the Government claims its policy will save them, research claims.
Data from lettings platform Goodlord, based on 30,000 tenancies processed through its software found rent increases and subsequent higher deposits will outweigh any benefit of the fee ban in many regions.
This is particularly the case where agents and landlords use the full six-week cap proposed on a security deposit, Goodlord said.
The proptech firm found that so far this year, tenants were required to have on average £3,039 available per property.
This includes the first month’s rent (£1,092), security deposit (£1,442), tenant fees (£209) and a refundable holding deposit (£296).
Goodlord found tenants in London needed the highest amount upfront per property at £4,347.
Assuming the fees ban does come in next year, tenants will no longer be required to pay the average £209 in fees, but based on rents rising by 1.7% – according to the ONS – the average UK rent will be £1,111 per month.
If the Bill is passed, the average maximum security deposit – capped at six weeks – could then be £1,534 and refundable holding deposit £256.
This means the total potential amount of money a tenant would need to move home in 2019 would be £2,901 – only £138 less than in 2018.
The government consultation and policy response on banning tenant fees put the average charges at £200-£300.
Goodlord found London tenants could save the most – an average of £209 per property, followed by £248 in the south west of England and £189 in the south east.
But tenants in the north of England could pay an extra £126 due to the level of rent rises and if agents and landlords use the full six week deposit cap.
This is based on an renters paying £69 more in the north west and £57 more in the north east.
Tom Mundy, chief operating officer for Goodlord, said: “Our industry needs regulation that doesn’t penalise good letting agents, promotes sustainable rents for tenants and gives landlords peace of mind.
“Current government legislation is making it harder for this to be the case and in some cases the proposed tenant fee ban is making it even more costly for the very people it’s trying to protect.”
The Tenant Fees Bill returns to Parliament today, reaching the committee stage in the House of Lords.
Comments (10)
Why has the holding deposit been included in the figures? Possibly an unscrupulous agent/landlord will keep it for a long time under the current system but once the TF bill is in place the HD will have to be returned within 7 days of the tenancy agreement being signed unless the tenant says it should be put towards the first month’s rent or the deposit.
As the 1.7% rent increase is based on ONS figures, I have to assume it is just ‘normal’ rent inflation. Even if the TF bill was not coming into force the rents would be going up by this much. I would expect the TF bill to increase rent by ((amount of increase in landlord fee / length of contract) * (1 + (monthly landlord %age fee / 100))) on top of this inflation. i.e. the landlord will be in the same financial position and the agent will have collected MORE money than from tenant fees.
The current figure for the deposit is about 5.7 weeks rent. Why are the landlords that taking less than 6 weeks rent suddenly going to decide to take more? I would suspect that there are a lot of landlords taking 2 months rent as deposit and this will be reduced by the TF bill.
The tenant will save in the short term because of the TF bill (i.e. the setup costs) but lose out in the long term. If a 6 months tenancy is £1000 pcm, tenant fees £210, landlord management charge 12% then ignoring rent increases (which only make the situation worse for tenants):
without bill:
tenant costs: 6 * £1000 + £210 = £6210, landlord receives: £6000 * 0.88 = £5280
ongoing rent = £1000pcm with landlord receiving £880
with bill:
rent will be increased to £1000 + ((£210 / 6) * 1.12) = £1039.20 which will be rounded to £1040
tenant costs: 6 * £1040 = £6240, landlord receives £6240 * 0.88 – £210 = £5281.20
ongoing rent = £1040pcm with landlord receiving £915.20
And in other news; Despite the charity Shelters riches, fat cat salaries and questionable activist action they still provide zero housing for the homeless and potentially cost the poorest tenants more.
Breaking News; Goodlord found tenants in London needed the highest amount upfront per property
In other news, fire burns…
Of course tenants will not pay less!
Someone has to pay for the time it takes in properly dealing with referencing, applications and preparing tenancy documentation. We have the best of systems and it still takes time and staff cost money.
My staff cannot work for nothing and I am not a charitable organisation, so, fees to landlords will increase, rents will go up to compensate and tenants will pay more, andf probably rather more than the cost of a application fee in the first place. There would be nothing wrong with capping application and referncing fees.
What I like about application fees is the commitment of the tenant to put some money on the table and secure that property. We have many properties where several people want to view and we have to put in a fair and transpaent system. We all know the tenant who makes the most noise isn,t necessarily the one who pays up or who checks out as an acceptable tenant.
And Votta is correct, you need to be dealing with a quantity of rentals day in day out to fully understand.
I just don’t get why the Government cannot see this!
It’s because the government of crammed full of pencil pushing idiots that don’t understand business!
I expect tenants will end up paying expedentially more, over time, and in some areas they already paying more as landlords and agents gear up for the change!
The way I work those type of properties, with lots of people who want to apply, is that I get applications and cover letters from all interested parties, create a long list and reference the top couple of people, and the successful one pays the fee.
Yes, my profit line takes a bit of a hit on that as I have to reference several people, but I think that is the fairest way. We don’t refund fees as a general rule, so charging 3-4 people when I know only 1 will get it seems unfair.
The tenant fees ban could end up saving renters just £138, below the average £200-£300 that the Government claims its policy will save them, research claims. Whaaaaaaat???? What about the capital economics report?
You mean it will cost tenants an extra £600 a year. Year on year for the lifespan of the tenancy once landlords increase their rents by £50 a month. Or do what one agent has been caught doing, increase rents on all renewals by 20% then the tenant either pays it or gets their s21 the next day. Then the agent gets a new load of set up fees from the landlord, landlord is out of pocket tenant is forced to pay or move. Either way that agent counteracts the fee ban unscrupulously.
You can look at as much research as you like but unless you let properties day in day out you won’t have a full understanding what’s happening on the front line and what landlords are saying then Tenants will not save they will lose out.
From my experience, only about 20% of the country have the tenant demand to be able to demand higher rents.
With the continued building of student accommodation by Unis, even the cash cow of students is starting to wane.
A no brainer that ultimately the tenant will pay more and irrespective to regional demand landlords will see rent increases as one of the only ways to off set the increased costs they will experience once the fee ban kicks in through increased agents fees combined with the loss of the ability to off set mortgage costs, wear and tear allowances, second home surcharges etc.
Not a good time to be a landlord and an even worse one to consider purchasing a property to let out as an investment, as evidenced by recent posts indicating a 53% decline in BTL activity!
Equally not a great time to be a tenant, those that are longer term are going to suffer cost increases albeit they haven’t incurred an actual ‘tenant fee’ for years; whilst newer renters or those looking to up size or down size will need to pay more to do so in the form of rent increases.
Not entirely sure what the government really wanted to achieve! Yes first time buyers have replaced BTL inventors but not in the numbers necessary to keep the housing market buoyant and with the cost of housing being out of reach for most this is unlikely to change anytime soon.
Votta583 what agent in their right mind would consider a 20% increase in rent? Over the last three years my own increases, (on a sizeable portfolio I might add) only equates to 3.4%! If I were a tenant receiving such a demand I would simply refer the matter to the RAC and ultimately leave and find something more affordable elsewhere. Thus leaving the landlords using such agents with huge void periods as the asking price will be so far out of touch with reality as to result in the property never letting! Any agent considering such a massive rent increase to combat the loss of their tenant fees must surely be skating on very thin ice indeed with not only their tenants but also with the landlord clients they purport to serve!