The Renters Reform Bill will cost letting agents over £275m in the next decade as fewer landlords use their services.
That’s the claim discovered in the small print of a government impact assessment on the Rental Reform Bill, now going through Parliament.
The costs, estimated over 10 years, do not take into account the time agents will have to spend familiarising themselves with the new measures contained within the Bill. However, according to the impact assessment, the government states agents will benefit from the Property Portal, as they will be able to register on behalf of landlords and charge for this service.
The Impact Assessment goes on to conclude that the main costs of the Renters (Reform) Bill will be borne by landlords and that “the estimated net cost to landlords is £10 per rented property annually”.
However, at a recent Levelling Up, Housing and Communities Committee oral evidence session, Housing Minister Rachel Macleanadmitted that the government may beef up the Bill to include other measures such as the Decent Homes Standard which will put yet more costs on landlords and agents.
“Let-only agencies will rightly be concerned about potentially losing £278.7m because of the Renter’s (Reform) Bill” says Neil Cobbold, managing director of PropTech firm PayProp UK: he has been scrutinising the measure.
“But savvy agents will have already spotted the opportunity in the proposed regulatory changes. It will be key to convert your existing let-only landlords into fully-managed clients. Charging landlords a fee for services including rent collection, maintenance and compliance with the Renters (Reform) Bill and the hundreds of other rules that govern the private rented sector, will boost your agency’s bottom line.
“However, for agents and landlords to properly assess the impact of the Renter’s (Reform) Bill on their businesses, we need more information from the government on how some of the measures will work and when they will take effect. Details on court reforms to speed up evictions, the Property Portal and the new ombudsman will be essential.
“We also want to see the Department for Levelling Up, Housing & Communities publish a revised Impact Assessment if new measures are introduced as amendments. This will allow all involved in the industry to judge the potential costs and benefits of any changes to the proposed Bill.”
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'The Impact Assessment goes on to conclude that the main costs of the Renters (Reform) Bill will be borne by landlords....'
No. The costs will be borne by the end user - tenants.
If agents feel overwhelmed by the changes, Landlords will feel this even more. I'd argue that this is one of the biggest opportunities ever to win over some of the 1m (50%) of Landlords who don't use an agent at all AND to convert LO over to an RC or FM service. Thoughts will need to be had around fees structure- including if there are any minimum charges applied if a tenant gives notice to leave early in the tenancy (in line with current proposals that they could leave after just 2 months). Whilst there is no argument there will be a lot of work involved in transforming our businesses around the new legislation, there are huge opportunities ahead.
Landlords are not going to pay fees to agents to have a sitting tenant placed in their properties. What landlords want most is full control of their assets.
This could be an opportunity for agents - if they actually recognise what landlords want and adapt. If an agent can provide tenants who will leave after a fixed term e.g. companies then landlords will turn to those agents for help - and will be happy to pay for their services.
So is the £10 annually the cost of registration? If not, then it will cost landlords lot more than a tenner a year.
Intro only agents need to pivot their model immediately and need to start learning how to win and service FM tenancies, whether this comes in or not. As assured tenancies have no term it will be interesing to see what models develop for fee structures, there will need to be alternatives to the FM 10-17% monthly charge, break clauses will be gone, how would an up front fee be justified? Will a fixed fee simply be charged instead for sourcing a tenant and then a renewal fee charged every 12 months if that tenant remains? Canvassing will be hugely less effective, perhaps even pointless based on tenant only notices. I agree with Kristjan though, there will be plenty of opportunity but lots of hard work as well in quite a short space of time. I remember all the work we did @ LSL that went into mitigating the damage of the tenant fees act which kept being kicked down the road as well, needs to start soon, as before you know it, it will be here.
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