Housing Research

Letting The Market Down?

Assessing the economic impacts of the proposed ban on letting agents fees. As part of our tenant fees campaign we commissioned leading consultancy Capital Economics to look the impact of the letting agent fees ban on landlords, letting agents, households, the buy-to-let sector and the wider economy.

Key findings:

• Total turnover in the residential lettings sector in England and Wales is around £4 billion and it employs around 58,000 workers
• Residential lettings activity is localised with at least 2,000 jobs supported in each region
• The introduction of a ban on letting agent fees charged to tenants would be the third hit to buy-to-let activity in recent years, which exacerbates downside risks to the private rented sector, wider property market and economy as a whole
• Fees charged for letting activities reflect real work to be undertaken and therefore if the ban on fees goes ahead, the costs will need to be recovered
• On a comparable basis, fees for letting a property are lower than buying a house in the United Kingdom, while they are also lower than in some other major economies
• Landlords are likely to pass on higher agents’ fees to tenants in the form of higher rent. In the most plausible outcome, letting agents lose £0.2 billion in turnover, landlords lose £0.3 billion in income and tenants pay an increased rent of £103 per annum
• The impact on letting agents is likely to result in a loss of jobs to the tune of 4,000 workers
• Although renters will benefit from a reduction in up-front fees, most of this will be passed back to them through increased rents; those tenants who move more frequently will enjoy a saving on overall costs but those who do so less frequently (which are likely to be lower income families) will see a loss

David Cox, Chief Executive, ARLA Propertymark commented on the findings: “The lettings sector is worth about £4 billion and employs around 58,000 people all over the country. The Government’s Autumn Statement announcement that it plans to ban letting agent fees was the third big blow in as many years for agents, and exacerbate the threat to the private rented sector; an increasingly important tenure on which millions of people rely.

“For many tenants, buying a property simply isn’t an option, and they must depend on the private rented sector to provide security, good standards and fundamentally, a home. Our findings show that landlords are likely to raise rents as a result of the ban on fees. Those tenants who move least frequently, which tend to be lower-income families, will be worst hit by rent rises. This is ironic and shows that there will be unintended consequences to what, in effect, is a crowd-pleasing, populist policy.”

View the report

Further Research