Opinion: Banning letting agent fees is a sweeping measure that wasn’t properly thought out and doesn’t get to the root of the problems

Property is one of many industries that has fallen behind the times when it comes to accountability and transparency. In my view, one of the best ways to improve any industry is with carefully thought-out investment in regulation, especially in a world that increasingly demands accountability.

The lettings industry needs this as much as any other. That was undoubtedly the motivation behind the Tenant Fees Act 2019, which gained Royal Assent this month and is due to come into effect on 1 June, abolishing most upfront fees for tenants for services like inventories and credit checks.

However, it is the responsibility of government to weed out the rogue operators, not to tamper with an entire industry in such a sweeping way. The whole point of regulation in a free economy is to set parameters that govern behaviour to protect consumers against professional abuse.

It is not to ban an entire industry from employing the wholly acceptable practice of charging a consumer for their professional services and time. In a competitive industry, it is not unrealistic to presume a figure can be agreed with the consumer, provided that the industry is not controlled by a handful of operators. In 2015 there were 16,547 registered UK estate agents – hardly a monopoly by anyone’s standards.

One solution would be for the government to clearly define acceptable and, more importantly, unacceptable behaviour in law. As a recent example, detailed legislation was introduced to ensure that agents were required to clearly display what they charge to their tenants and landlords. As a result, this created less confusion and greater trust, making the lettings process more positive and transparent for all.

Letting agents are now seeing significant revenue streams cut in favour of a short term political win

A reasonable next step would have been to suggest further legislation to ensure agents clearly demonstrate what tenants are being charged for and to restrict them to charging a fee per tenancy (and not per person). A further logical step would have been to identify the wrongdoers in the industry and to regulate them with accurate and punitive legislation, as has been successfully adopted with deposit legislation for rogue landlords, who are consequently fined up to three times the deposit amount for poor behaviour.

But banning all tenant fees is a quick win for the government, tapping into the dislike and mistrust of a once outdated industry.

It’s easy to pass so it’s being used to generate ‘good noise’ for a troubled government that’s looking to curry favour with the growing ‘Generation Rent’ voter base. Why would tenants oppose the short-term gain of not paying a fee?

But what will happen over the longer term, when a shortage of rental housing – something that’s widely predicted due to the stamp duty reforms brought in to cool the buy-to-let market – starts to really take effect?

There are fewer landlords than ever entering the private rental market and letting agents are now seeing significant revenue streams cut in favour of a short term political win. But I cannot envisage anything other than rent rises, which – thanks in part to this legislation – will cost our tenants a lot more than an administration fee.