Landlords will drop their letting agents if costs rise as a result of the lettings fee ban, finds a new study by lender Kent Reliance.
The research found that letting agent fees are the second highest cost for buy-to-let landlords, and could rise further if charges to tenants are banned.
The study looked into the costs of running a buy-to-let portfolio, finding that landlords spend £4.7 billion each year on letting agent fees, at an average of £870 per property.
The figures were compiled based on desktop research of mid-tier letting agent fees, and contribute to an average of £3,632 per year that landlords say they spend on running their portfolios.
Yesterday, we reported that it’s the largest letting agents in the country that are charging the highest fees to tenants: https://www.justlandlords.co.uk/news/largest-letting-agents-highest-fees/
The highest single cost involved in running a buy-to-let portfolio was for property upkeep and maintenance, which costs £1,025 a year.
The report acknowledges that lettings charges for landlords could get higher if the fee ban is introduced. It states: “If we do see tenant fees prohibited, and, as planned following the Government’s consultation, we may see landlords’ costs rise further, as letting agents seek to recoup lost revenues.
“No doubt many landlords will try to absorb these costs or pass them on to their tenants in the form of rent increases, but there is likely to be a lag before they can be fully recouped.”
Property upkeep and maintenance was the most popular area to make cuts, identified by 17% of landlords, followed by letting agent fees and mortgage costs, at 10%.
Considering the 5.3m private rental properties in the country and the running, purchasing and mortgage costs associated with them, the report estimates that, overall, landlords currently contribute £15.9 billion per year to the British economy through pre-tax spending on running their portfolios, supporting thousands of jobs.
John Eastgate, the Sales and Marketing Director of OneSavings Bank – parent company of Kent Reliance – comments: “Landlords may seem like an easy target for political point scoring, but they play a vital role in the economy.
“Not only do they house a huge proportion of the country’s workforce, bridging the housing demand and supply gap, their spending supports thousands of jobs – whether builders, cleaners, lawyers and accountants, or letting agents.”
He warns: “Trying to tackle the housing crisis by targeting landlords with punitive taxes is very simple and politically highly palatable, but has unintended consequences. Either it means less work for all those who support the property industry, or it means tenants will have to foot the bill for the Government’s tax raid or both.
“One side effect of the recent changes, and rising running costs, will be the professionalisation of the sector, as amateur and accidental landlords leave the market. There is nothing wrong with having fewer, bigger landlords, but that alone will not help more young people get homes.”
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