Debate on deposit caps and lettings fees sparks hope for landlords
A Parliamentary debate about the proposed lettings fee ban has sparked optimism amongst landlords on the subject of capping deposits.
Kevin Hollinrake MP, who backs the letting agent fee ban, admitted the plan to limit the amount landlords can charge as a deposit will create problems for landlords, during yesterday’s debate (Wednesday September 6).
He said: “The consultation suggests limiting security deposits to one month’s rent. “The difficulty with that is that a number of tenants will try to use their security deposit as their last month’s rent.
“We know that around 50 per cent of tenancies end with condition issues and work required.
“Limiting the security deposit to only a month’s rent raises the possibility of leaving the landlord out of pocket, because it is very difficult to chase a tenant for a debt once they have left.
“One month may be too short a limit; we need to look at that.”
Derek Thomas MP questioned how the deposit cap would be calculated and said it should "reflect what would be a reasonable amount to bring a property back to its former condition, rather than a typical month’s rent.”
Landlords are concerned about plans to cap deposits and fear they will be deterred from taking a chance on tenants who are not obviously financially secure.
Under the new plans they will have no ability to mitigate the risks and fear the “unintended consequences” of the policy.
Julian Knight MP said if landlords were forced to pay referencing fees, they would face multiple fees if a tenant was revealed to have very poor references.
He said: “We should not be too damning of landlords. We hear a lot of propaganda about private landlords, but the environment for landlords has become much more difficult.
“Small landlords who own only one, two or three properties have a less favourable tax regime than they did.
“Perhaps it would have been better if we had targeted interest-only mortgages, rather than all landlords who have mortgages.
“Perhaps a higher up-front stamp duty would have been a better, more income-generating way of producing the same result.
“Landlords have had a difficult time in many respects."
He warned that without private landlords 'a bipolar world' would be created and tenants would be confronted with the stark choice between 'social housing or large faceless corporate landlords or large property owners.'
“That would not be ideal, and could impact the property market and the most vulnerable of tenants," he said.
Iain Stewart MP warned: "If we are to have a blanket ban on letting fees, the danger is that the cost gets passed on to the landlord and then passed on in higher rents.
“I am interested in exploring the tenant passport model, which could be based on the mortgage-in-principle situation—people could have what is almost a “right to rent” done in advance, with the costs taken from both the landlord and the agency.
“The market could deliver a very cost-effective such product, which would increase transparency and the ease with which people could rent.”
Housing Minister, Alok Sharma MP, said the government believes 'that a ban will help to deliver a more competitive, more affordable and more transparent lettings market'.
The government hopes to publish its response to the letting agent fee consultation 'shortly', he said.
He added: “The government does not accept that rent levels will necessarily rise as a result of the fee ban, as there is evidence that some agents are charging excessive fees.
“Indeed, studies have been done on the potential impact on rents, and all of them show that while there may be increases in rents, they would be significantly smaller than the fees tenants are currently being charged.”
Kevin Hollinrake MP concluded the debate by saying: “It is refreshing to hear members on both sides accepting that, in the main, landlords and agents do a professional job and are part of the solution, not the problem.
“I agree with the sentiments of my hon. Friend the Member for Solihull (Julian Knight) about ensuring that the future of the private rented sector will be about not just institutional investors but small and medium-sized enterprise landlords, who provide much of the diversity in the location and type of private rented accommodation."