Banning letting agency fees for tenants is just a PR stunt

The announcement by Chancellor Philip Hammond in his Autumn Statement that letting agency fees charged on tenants will be banned has been met with cries of outrage from estate agents.

Their rage is in part justified. Lately, they have been asked to do much more administrative tasks than simply running credit referencing checks. They are also supposed to check immigration papers as well, to ensure that prospective tenants have the right to be in the country in the first place.

Depending on the type of contract they have with the landlords, letting agents are also responsible for tasks such as ensuring that gas safety checks are carried out, inventories, etc.

On top of what it means for estate agents, the decision is important because it shows a shift in the government’s thinking regarding the housing market.

This signals that the balance, which has been heavily tilted towards favouring landlords, is beginning to shift ever so slightly towards trying to make renting fairer for tenants. Unfortunately, it is just a token gesture by a Tory party wanting to get reelected.

A recent study titled “Happiness and House Prices in Canada: 2009-2013” by Hussaun A. Syed from Wilfrid Laurier University, Canada, shows that, while homeowners’ level of happiness increases when home prices rise, the tenants’ doesn’t. The study used Home Price Index data for the period and happiness data from the General Social Survey to arrive at its result.

It would not be too much of a stretch to believe that the same is true in the UK. A lot of the tenants in Britain are forced to rent because house price inflation has pushed homeownership out of their reach. Government efforts such as “Help to Buy” programmes have poured fuel on the house price inflation fire, blowing the bubble to even greater proportions.

On the other hand, renters don’t have many rights in the UK. In Germany, for instance, one can rent for a long period and is free to put one’s own stamp on the property (like putting up shelves, or changing the kitchen), as long as the basic structure remains the same.

In Britain, typical tenancy agreements run for six months or one year and the tenant has to ask for the landlord’s permission for even something as basic as hanging up a picture. Rent increases are not regulated like in other countries, where rents can only rise by a certain amount each year depending on various things such as inflation, improvement to property, etc.

Moreover, there are no penalties for landlords who refuse to carry out necessary repairs, which in many cases translates in properties that are sub-par to downright dangerous for tenants’ health.

These frustrating conditions make renting such a bad option that they ensure that virtually everybody in the UK is eager to get on the famed “property ladder” as quickly as possible, thus keeping home prices elevated.

Improving any of these conditions, either by making it compulsory for landlords to increase lease lengths and allow more freedom to their tenants or tying rent increases to inflation, would disadvantage the landlords, who are the main Tory voter base.

So the only option the chancellor had in order to make the government look like it was doing something for tenants too, while not really doing anything to improve their lot was to ban letting agency fees.

This does not penalise the landlords too much, because for the moment they have a lot of bargaining power over letting agencies. And it does not touch on the other, more fundamental issues that make renting such a bad option in the UK. A clever, populist PR move.