Are Labour right to ban tenant fees before we know the real impact in Scotland?

publication date: May 12, 2014
author/source: Kate Faulkner, Property Expert and Author of Which? Property Books

Are Labour right to ban tenant fees before we know the real impact in Scotland?

If Labour are successful, there are four potential scenarios for landlords and letting agents:-
  1. Absorb the cost and tenants ‘win’, but tenants apply for multiple properties, delays occur, landlords frustration increases and they sell up, reducing stock.
  2. Pass on the one off cost to Landlords and Landlords pass the cost to tenants via increased monthly rents – potentially costing tenants more during the tenancy. Increases in Scotland suggest this could be between £300 and £500 extra A YEAR!
  3. Letting agents/landlords restrict tenancies to ‘easy tenants’, so those with animals, on benefits, needing guarantors, have CCJs etc are avoided and find it increasingly difficult as stock to rent versus demand tightens.
  4. Tenancy agreements remain legal, but are not adjustable at the tenant’s request as there is no payment for the work, so no tenant changes are accepted.
What’s happened in Scotland?
Well checking out the latest rental indices, things don’t look great, depending on which report you look at as in most other areas, rental growth is slowing.

In Scotland though:-
  • Homelet say rents are up by 0.5% year on year, 
  • Belvoir Lettings suggests rents are pretty much the same. 
  • The Office of National Statistics says rents are up higher in Scotland than anywhere else: 1.3% in Scotland, 1.0% in England, and 0.6% in Wales in the 12 months to March 2014. 
  • Citylets (mostly Aberdeen, Edinburgh, Glasgow and Dundee) suggest rents are up 3.6% - that’s £25 extra a month for tenants, so an extra £300 cost per year for tenants. Other agents rental increases support these rises. 
  • MovewithUs figures show a £40 per month increase in Scotland – 6% up year on year, an extra £480 per year for tenants. 
Overall a mixed picture, but certainly figures suggest Scotland is seeing higher increases in rents than other areas and this could be due to a lack of tenant fees being passed on via rents.

Are politicians penalising the property industry for their own failings?
What I find interesting is politicians appear to be blaming and penalising the industry for their own failings rather than fixing the real problems.

It is politicians who have refused to regulate this sector, while failing to build enough social and affordable homes to house vulnerable and cash strapped tenants and pushing them into the PRS.

Labour refused to regulate letting agents when the Ombudsman Schemes came in for Estate Agents. The current government have refused to insist on the essential Client Money Protection and full letting agent regulation.

If this had been done, tenants and properties, in my opinion, would both be well looked after and the issues continually raised wouldn’t be an issue.

Finally no government has provided enough funding to:-
  1. House vulnerable and low paid works
  2. Educate tenants on their rights and responsibilities when renting
  3. Close down rogue and criminal agents and landlords. In fact it’s the opposite. Tenants are told ‘all agents/landlords are bad’ so they choose a property first, not, as they should, a landlord or agent and if they are badly treated are not protected.
The reality is the current problems are caused by a lack of action on behalf of politicians, so you have to ask – is penalising the business models of good agents and landlords as a result fair or sensible?

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