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Could the tenant fees ban leave tenants worse off?

The government’s tenant fee ban has been widely championed in the consumer press as a big win for renters – but their victory starts to look somewhat hollow when you consider the possible unintended consequences.

No longer faced with what can feel like unnecessary and extortionate charges, their relief will be short-lived if rents start to rise because housing demand outstrips supply.

Anyone in the rental market, from asset managers, to letting agents and landlords with just one or two properties, is already all-too-aware of the costs incurred during a tenancy.


Deep cleaning after someone has moved out and general maintenance are obvious examples, and there is also a tremendous amount of work involved in running credit checks, following up references and ensuring safety regulations are met.

Corporate landlords, responsible for Build to Rent (BTR) blocks and developments, are generally better placed to absorb these costs. As well as benefitting from economies of scale when it comes to property upkeep and admin, a company like ours does not tend to rely on tenant fees for revenue in the first place.

On the other hand, small-scale professional landlords, and those who have fallen into it accidentally, will inevitably be affected by the ban the most.

With many already counting the cost of changes to mortgage interest tax relief, and the general upkeep of properties, time will tell whether these individuals simply drop out of the market and move on – leaving some regions desperately short of rental housing stock.

If this happens, it won’t be long before tenants are forced to pay more in rent. Worst hit will be the smaller and less affluent towns, where BTR is less established, rather than big cities like London and Manchester, where there are more corporate landlords.

Even if the tenant fees ban fails to put off traditional landlords, they could see their income drop to such an extent that it is no longer worth investing in the property, other than meeting their minimal legal obligations.

This means tenants are once again losing out, potentially paying more rent for a poorer quality home.

The same is true of letting agents, who might see their margins suffer so much that they are only able to deliver the most basic service.

As well as potentially seeing housing standards fall, some renters could also see their choice limited if they own a pet, for example. Accounting for around 10% to 12% of tenants, pet owners traditionally pay higher deposits – so if landlords are no longer able to charge the same amount, they could refuse to take them outright.

There is no doubt that the ban will force many in the sector to rethink their business models, focusing on making it as efficient as possible. For BTR landlords, like ourselves, there won’t be too much change, due to the volumes we supply, we have never needed to charge tenant fees.

Those in the industry have no choice but to abide by the new legislation, though that’s not to say it’s a good idea. Instead, as an industry we should be determined to make it better for our customers, focusing on keeping standards high while being as flexible as possible, no matter how challenging this might be.

Above all, we need to ensure customers are at the centre of what we do, asking for feedback and rewarding good tenants with longer-term agreements. Whatever happens once the ban is in place, making sure people feel valued from the start means they are less likely to move out - the best result all round.

*Anne Malone is a PRS specialist at SDL Group 


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