From 1st June 2019, the Tenant Fee Ban has been in place in England which will make it illegal for landlords to charge lettings fees and with deposits now capped at a maximum of six weeks’ rent. Whilst this policy clearly aims to provide security to tenants, the benefits for landlords are also palpable, both in the short-term and long-term.
On average, individuals are forecast to save £400 per tenancy with the new legislation and tenants should be feeling more secure without the spectre of fees hanging over them. With further moves towards pro-tenant legislation put forward by the Government, such as the abolition of Section 21 evictions (encompassing evictions whereby no fault needs to be declared by the landlord), it is clear that rigour in the marketplace is a high priority for the Government. With the so-called “Generation Rent” of younger tenants now becoming a real electoral force, this pro-tenant legislature is expected to continue in order to curry favour with this sub-section of the electorate.
Scotland, which brought in similar legislation seven years ago, has proved that banning the fees will have very little effect overall on the market. While many have been concerned that the lost fees will be reflected in higher rental prices, for Scotland only 2% of landlords actually increased rents as a direct result of the ban.
For landlords, although on the surface some of the changes to the market may seem like a challenge, many will have already adapted their practices for the market. Longer tenancies, some as long as three years, are already common in the marketplace and offer the stability which the legislation is looking to implement. A longer tenancy is clearly beneficial for a landlord as there is a long period of guaranteed stable rental income, and with a longer tenancy often comes better preservation of the property as tenants will treat the property with better due care and attention.
For landlords, the lettings market as an entity is likely to change in the long term thanks to these legal changes, bringing a different demographic of renters who rent by choice rather than necessity due to the favourable tenant market. With a new demographic of renters with higher disposable incomes available, this could provide a new avenue for landlords who are looking to increase their rental yields.