The hidden cost to tenants of the Tenant Fee Ban

Estate Agents should expect to advise landlords and tenants alike on the likely increases in rent due to the Government's latest regulation.

The industry warned that there would undoubtedly be unintended consequences as a result of the Tenant Fee Act (2019) which came into effect on the 1st June 2019. The most obvious of these was likely to be a rise in rents but no one could have predicted how quickly this knock-on would take effect.

Immediate increases in rent

In fact, just 2 months after the implementation of the ban, new data indicates that tenants are already experiencing rent increases.

ARLA Propertymark’s latest Private Rented Sector (PRS) report confirms that 55% of its members saw landlords increasing rents in June 2019; an increase of 22% from May 2019. This is worth noting as the previous record was an all time high.

The Tenant Fee ban cannot be blamed entirely for this increase. It would not be realistic to suggest that the figures quoted in ARLA Propertymark’s PRS report are completely due to one singular change in the industry but the year-on-year increases are without a doubt the result of the supply versus demand imbalance in the market.

The tweaks that each new housing minister has sanctioned in all aspects of the PRS, appear to be coming home to roost in a perfect storm that the end-user will be unable to avoid.

Increased costs and higher taxation on PRS landlords have set a precedent for a steady exit of landlords from the market while demand from prospective tenants continues to increase.

Longterm consequences

One cannot help but wonder how much faster landlords will leave the sector should the proposed abolition of Section 21 come to pass and it is little wonder that the Mayor of London has recently begun to call for rent controls. Yet, such measures will only cause the sector to shrink further as the number of new landlords that invest in the PRS market drops with each month that goes by. Supply and demand dictate that rents will rise as less rental accommodation comes available.

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