The government’s promised ban on lettings fees to tenants is yet to get off the starting blocks, but it could hit lettings agencies hard if they are not prepared. Mark Crampton-Smith of College and County explores why the ban highlights the need for a sustainable, long term approach.
In the 2016 Autumn Statement, Chancellor Philip Hammond said the ban on tenants’ fees will save 4.3 million households across the UK hundreds of pounds. The lettings agents who have charged high fees to tenants in the last few years, sometimes as much as £600 for signing a contract, are facing a big challenge when the ban takes effect. Their earnings from these fees, which can be up to around 30%, will disappear from their balance sheets unless they pass them onto landlords or absorb them in cost savings.
So it’s not surprising that agents are warning in their droves that lost revenue will be switched to landlords, eventually leading to higher rents.
While this may happen in some cases, it is hard to believe that landlords, who can easily shop around for agents, will simply accept higher fees. And, in a market that is straining under high rent prices, landlords will be far less able to pass cost increases onto tenants than they were even a year ago.
At College and County we take a longer term perspective. We have been working as lettings agents in Oxford for long enough to know that to grow a sustainable business, the focus must be on trust, fairness and quality of service. Today, our landlord clients and their tenants place higher expectations than ever on our ability to deliver a quality standard of service. And they expect us to take an ethical approach.
According to the English Housing Survey, almost half of 25-34 year olds (46%) rented privately in 2014-15, up from 24% a decade before. These are young professionals who are building their careers and growing families. They need quality housing, stable rental agreements and landlords they can trust.
In Oxford, which suffers a perennial housing shortage and has yet again been declared the least affordable place in Britain, the proportion of rented properties has almost certainly exceeded the national average. Many private homeowners in the city have become landlords, renting out their homes as they downsize or move away from the area. These clients look for stable, quality tenants who pay their rent on time and look after their properties.
Both landlords and tenants have more choice as new types of property services such as Purple Bricks are emerging to offer alternatives to the traditional providers. Local agents who maximise their fees for short-term profit will lose out to these new business models before too long.
These are just some of the reasons why at College and County we don’t fall into the trap of chasing high profits for short term gain. We are the only agent in Oxford which does not charge renewal fees as we want to reward and keep great tenants for our landlords, not turn them away.
So, when we comply with the ban on tenants’ fees, our clients can be assured that we won’t be passing on hikes to landlords’ fees. And because our fees are set as low as possible to reflect administration costs, we won’t be facing a massive financial hit that could jeopardise our business.
Looking ahead, we will continue our strategy to grow a sustainable business as one of Oxford’s leading lettings agents. To us, being on hand to guide our clients with a friendly approach and deep knowledge of the marketplace are all part of the service.
This article appeared in B4 magazine, May 2017.