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Buy-to-let landlords likely to increase rents to offset higher costs

There are growing fears that tenants will end up bearing the cost of the government’s decision to ban letting agents' fees to tenants, with fresh research revealing that buy-to-let landlords will be left with no alternative but to pass extra charges onto tenants if they are required to pick up the cost of tenant fees.

A new survey from online letting agent Upad found that 40% of landlords plan to increase rents if they are charged fees for a range of administration, including reference, credit and immigration checks, as well as the drawing up of tenancy agreements.

According to the charity Citizens Advice, the fees currently cost tenants an average of £337 per person, but the proposed changes announced by the chancellor Philip Hammond in his Autumn Statement could see these charges shift to landlords.

Only a third of the respondents questioned said that they would definitely not raise their rents, meaning that potentially two-thirds of tenants, or up to 2.6 million renters, could face a permanent increase in rent as a direct result of last week’s announcement.

The research also revealed that 75% of buy-to-let investors have no plans to sell their properties, despite a barrage of charges inflicted on landlords over the last year, including the introduction of the stamp duty surcharge in April, the scrapping of the 10% Wear and Tear tax relief for landlords who rent out furnished homes, while mortgage tax relief is set to be phased out from next year.

James Davis, CEO and founder of Upad.co.uk, commented: “Once again a measure that has been brought in to punish landlords has come home to roost.

“Due to the chronic housing shortage we face in the UK, the lettings market is under immense pressure and this attempt to help potential first-time buyers has actually done more harm than good.

“Instead of punishing landlords, we need to find ways to increase the supply of quality and affordable rental property to help house the millions of people who need it.  Frustratingly for everyone involved, this research suggests that landlords will be left with no choice but to further increase rent.” 

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    Given that - according to your article - a third of landlords state they intend to put up rents because of the recent change and 40% state they will not, the headline 'Landlords Likely to Increase Rents' is simply wrong and misleading. The experience of Scotland - which banned tenants' fee some time ago - suggests most will not put up rents. I suspect a significant number of landlords will simply cut out the middle-men that are the lettings agents with their ridiculous fees and deal with their properties themselves - it's easy. When I used to use agents myself, I tended to have many more problems with the agents and their management of my properties than with the tenants themselves!

  • Mark Hempshell

    Landlords whose property is already tenanted probably won't want to raise their rents. Maybe that's what the 'only a third' relates to. But what when they come to relet their property?

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    I think that just as some portfolio landlords will not be able to recoup all of the cost of Section 24 by increasing rents and that therefore the burden will be shared between landlords and tenants, this change will mean letting agents absorbing a lot of the cost whilst also attempting to pass on some to landlords. As a landlord I was unaware of the extent of charges letting agents imposed on tenants - so if I pay them £800 (2 weeks rent) to let a 6-bed house, I thought that was plenty for sometimes only having to show a few groups around (admittedly, other times they might do 20 viewings for all I know and no-shows are a real pain and they have a certain amount of paperwork to do) - I didn't know they would charge a fee of 6 x £100 to the tenants as well. They tend to keep that aspect hidden from the landlord and I think it's because they realise it is too much - the tenants probably also don't realise that the landlord pays a big whack as well. Banning fees is ridiculous Government interference in business, though. They should just set some reasonable limits so that letting agents can't take the p*ss.

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    It's a no brainer that rents will increase and no doubt the blame will be laid on the increase of landlord costs. In doing research to set a rent figure the market will find it's own level based on supply and demand. High demand = high rent and low demand = low rent. No reason for demand to drop as LA's are not building and BTL landlords will not make any significant dent in those looking for somewhere to live.

  • Brit Sixteen Sixty Four

    I don't think it is a no brainer to raise rents, landlords have had a period of record low mortgage rates with the lowest costs to them today. Yes there will be some who are highly indebted and will raise rents but then they risk higher % of voids. The market will control rents if they go up to much, more people will choose to stay at home or share, if rents are still high then rent controls will likely be forced on the landlords by even a tory government.

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    You appear to have failed to understand my comments. Supply and demand sets rent levels and not the cost of borrowing. Too high a rent will result in no takers so as I said it's a no brainer.

     
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    • 09 December 2016 12:09 PM

    I can assure you that my rents will go up hugely. My accountant has warned me of an additional forty thousand pounds of tax liability ensuing from section 24. As I am not Bill Gates nor possess a high definition printing press for printing fake fifty pound notes, nor have a money tree in my back garden which is groaning under the weight of fifty pound notes..quess what. Yes the rents will have to go up! Please note we are not talking about minor adjustments either. Will this make me any better off? No, it just leaves me where I am now (which is cruising along gently, looking after our tenants with great attention and making a few pennies to keep the whole show on the road). So if I were a tenant right now I would be SCREAMING at my local MP.

     
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