1. Governance
August 23, 2016updated 04 Aug 2023 8:55am

Inflated fees give letting agents an incentive to “churn” tenants. It's time to scrap them

By Betsy Dillner

“Tickets will be accepted on other rail and bus services” is not a phrase anyone wants to hear at the start of their day.  But there is a baseline of decency on show here: the transport companies of this country would never be so low as to kick you off a train and charge you to get on a new one.

But what if, instead of your tube being delayed because of signalling problems, your landlord is evicting you? What if instead of finding a different way to work, you need to find a new place to live?

And what if they were going to charge you for it?

If you’ve been unlucky enough to be evicted from, or priced out of a tenancy – and around a quarter of us have – it is another indignity on top of all the others that you now have to pay letting fees just to get the keys.

Letting agents try to justify these fees in a few ways. “We have our costs too!” they say of photocopying while you need to pack your life into boxes; or, “We’re not singling you out – homeowners have to pay fees too!”

The difference is that those lucky homeowners will never be forced to move as long as they keep paying off their mortgage. Even the most conscientious renter never really knows if their landlord will serve them notice, or raise the rent to an unaffordable level. Many tenants paying those fees didn’t want to move in the first place.

The story of modern renting isn’t living in a house that doesn’t belong to you – it’s living in lots of different houses that don’t belong to you. And paying fees every time.

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Some tenants have the opposite problem: they’re desperate to move out of poorly maintained homes, but they’re trapped. The average upfront fees cost a two-adult household around £400, according to Generation Rent research. Last month’s English Housing Survey found that 34 per cent of renters living in unsuitable homes just can’t afford to move; for another 35 per cent, the cost of fees would be a factor in deciding whether to move.

Fees are actively hindering the efficient operation of the housing market. If we didn’t have fees, more people could move out of squalid flats, forcing landlords to improve their properties.

Tenants shouldn’t even need to pay fees: they’re not the customer – the landlord is. But tenants are in a bind – they need somewhere to live. As a result, letting agents are free to charge this captive market as much as they can. Our research found that some agents in London charge up to £780 for two people.

We know tenant fees don’t represent real costs: you can find third parties who charge £20 to conduct a reference while some agents charge £200. Try and charge those fees to landlords and they’ll find a different agent: that gives them a real agency to put downward pressure on fees. Even if fees were passed to tenants in rent they would be significantly reduced.

By charging inflated fees to tenants, letting agents are also giving themselves a huge incentive to “churn” tenancies by kicking tenants out so the next set can be charged fees. This might be against the interests of landlords as well – who might have been perfectly happy with their tenants staying indefinitely. If agents just relied on fees to the landlord and the percentage of the rent they receive, long term tenancies would align with everyone’s interests.

All this is why calls for a ban on fees are gathering momentum. More than a quarter of a million people have signed a petition started by website The Debrief; Baroness Grender has a private member’s Bill which would ban them; and now there is an Early Day Motion in the Commons that has been signed by MPs on both sides of the House.

We don’t know if the government will act. But the scandal of letting fees can’t have escaped the notice of our new Housing Minister, Gavin Barwell, who represents 22,000 private renters in his Croydon Central constituency.

A ban is not a silver bullet – there is still a huge shortage of homes. But by strengthening renter power, by making it easier to move away from bad properties – and putting some money back in people’s pockets – it goes some way towards making the renting market one that can work for renters, rather than against them.

Betsy Dillner is director of the campaign group Generation Rent. To complain to your MP about letting fees, click here.

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