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Glimmer of hope as MPs say they must ‘look at’ deposit cap plan

Sally Walmsley
Written by Sally Walmsley

MPs have debated the proposed lettings fee ban – with a glimmer of hope for landlords as even those backing the move raised questions about capping deposits.

Kevin Hollinrake MP outlined his support for the letting agent fee ban, during yesterday’s debate in Westminster Hall, saying it is the right thing to do, despite the fact that it may force rents up for tenants.

However he admitted the plan to limit the amount landlords can charge as a deposit will create problems for landlords.

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% 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 (Conservative, St Ives) also asked about the deposit cap and how it would be calculated.

He said: “The deposit should reflect what would be a reasonable amount to bring a property back to its former condition, rather than a typical month’s rent.”

He also expressed concerns that a deposit cap could prevent tenants having pets in their homes.

The RLA is extremely concerned about plans to cap deposits, which it believes will reduce flexibility within the sector.

It believes that landlords will be less likely to take a chance on tenants who are not obviously financially secure as, under the new plans they will have no ability to mitigate the risks. more worrying.

Other MPs also flagged up concerns about ‘unintended consequences’ of the ban and spoke in support of private landlords.

Henry Bellingham MP (Conservative, North West Norfolk) raised concerns about the potential consequences of the letting agent fee ban, and asked if the Government could instead look at a cap on fees paid or removing referencing fees from the scope of the fees to be banned.

He concluded by warning the Government of the dangers of “unintended consequences” of the policy.

Julian Knight MP (Conservative, Solihull) raised the question: “If we transfer referencing fees on to landlords, what happens if a tenant comes back with very poor references?

That means that the landlord would have multiple fees to pay. That is one unintended consequence.”

He concluded: “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.

“Quite rightly, they have had to meet new higher standards, but without landlords we would end up in a bipolar world with just social housing and 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.”

Iain Stewart MP (Conservative, Milton Keynes South) also expressed concerns about the unintended consequences of a blanket ban on fees paid by tenants, particularly higher rents.

He said:“What is needed is better transparency. 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.”

The 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” and argued that the ban in Scotland has not had the negative consequences that had been predicted by some.

He went on to make the point that it is landlords that choose letting agents, not tenants.

The Minister said that the government hopes to publish its response to the letting agent fee consultation “shortly”.

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.”

Concluding the debate, Kevin Hollinrake MP argued: “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.”

He continued: “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.

“Not everyone wants to live in a two-bedroom flat at a high rent in the middle of Manchester, which is what institutional landlords would tend to prefer over properties in more rural areas, which are also important.”

To read a full transcript of the debate on letting agent fees click here.

About the author

Sally Walmsley

Sally Walmsley

Sally Walmsley is the Magazine and Digital Editor for the NRLA. With 20 years’ experience writing for regional and national newspapers and magazines she is responsible for editing our members' magazine 'Property', producing our articles for our news site, the weekly and monthly bulletins and editorial content for our media partners.

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