Labour Proposals Could Force Rental Prices Up
Property Industry Eye posted a very interesting article on the 14th, enlightening the world to the fact that Labour’s manifesto does indeed confirm that they will be banning letting agents from charging tenants for their services, if elected. In the same article, we were also told that they are looking to make three-year tenancies the standard and were prepared to create legislation to ensure that happens.
My colleagues have already spoken at great length about our views on the banning of agents fees and I would just like to reiterate that if you cut those one-off costs, then letting agents will simply up the fee that landlords are paying, which will then drive rents up. The only thing this exercise will really achieve is swapping a series of one-off costs, for one-big long-term cost.
I’ve heard all of that before, what really captured my attention in this latest update is that they will introduce legislation to make three-year tenancies the standard. Speaking from a great deal of experience working with tenants, landlords and investors, I believe this proposal to be both short-sighted and restrictive, if it is as it appears on paper. I don’t believe I’d be wrong in saying that there are a number of cities in this country that will speak out and fight against any such legislation, as it completely ignores the needs of the city centre lettings market.
A lot of our tenants are second and third year students, many of whom have travelled to Birmingham from overseas. This demographic of people often require six month – one year tenancies, because that is how long they intend to live in the city centre, so they would be unable to commit to such a long-term tenancy.
Another large section of our tenant database is made up of young professionals who are working in the city as part of a graduate scheme. The majority of graduate schemes only last for up to two years so it actually becomes a hindrance if we are legally obliged to tie someone into a three-year contract, if they can only guarantee that they will be able to occupy the property for two of those years.
Finally, let’s think about experienced professionals. I love Birmingham as much as anyone and I do currently live in a rental property in the heart of the city. Many professionals will live in Birmingham city centre for the convenience of being close to work and the fantastic social offering. However, as life moves on and priorities change, many people will eventually look to move out to the surrounding suburbs or further afield and, currently, they can commit to a shorter-term deal while they prepare for the next chapter in their lives. For instance, after two very happy years living just 5 minutes from the office, my partner and I are now looking at buying our first home in Sutton Coldfield.
By making three-year contracts the norm, the Labour party are forcing people to start planning their lives a minimum of three years in advance. I don’t know about you but I could never have imagined that I would be in the position I am, three years ago.
I do completely understand that this legislation will be wonderful for families who are looking to commit to a rental property long-term in the suburbs, towns, villages etc but the city centre property market is a completely different entity which requires a completely different approach. You cannot create one solution to satisfy the entire private rented sector (PRS) as the PRS is misleading. By giving it one umbrella title you inadvertently trick people into thinking it is one sector which can be managed in one way. The truth of the matter is that the PRS is made up of a large number of submarkets which all require individual consideration and that is what these proposals appear to have overlooked.
I hate to be so cynical but this is a poorly-thought out blanket proposal designed to curry favour with the majority, created with the sole objective of winning as many votes as possible.
I am in no position to try and influence your political persuasion, one way or the other, however, if you are planning to let these proposals influence your decision then can I please implore you to fully research the long-term consequences before using these proposals to help you decide which party to vote for.
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