The tenant fee ban which will be introduced in England on 01 June will see a huge reduction of almost £3 billion a year in the sum of money currently tied up in the private rental market, new research suggests.
Citizens Advice claim that, under current rules, tenants are routinely required to pay a deposit equating to two months’ rent in order to secure a rental property, meaning that the average renter in England must hand over a deposit of £1,688.
The new research from property compliance specialists VeriSmart estimate that the private rental market is currently sitting on some £7.6 billion in tenant deposits, given the number of tenants currently in the sector.
The new law will mean that tenants whose rent equates to over £50,000 a year will face a maximum deposit charge of six week’s rent, while those paying under that threshold will see their deposit capped at five week’s rent.
This change is intended to save the average tenant £600 on their initial deposit and reduce the total deposit amounts down to a little under £3 billion. However, there is growing concern that these latest changes will only encourage more landlords to consider leaving the sector, with tighter regulations on stamp duty and tax relief making life harder for those operating in the sector.
It is believed that many landlords are now weighing up whether or not their future in the market is viable. Despite a continued lack of rental properties, many landlords feel that the opportunities to profit from providing these properties are being squeezed.
‘The introduction of the tenant fee ban will not only reduce the safety net charged by landlords in the form of a deposit, but it also means that they or their agents can no longer charge for other fees which have historically supported the market, fees such as for tenancy agreements, inventories and check-ins etc,’ said founder of VeriSmart, Jonathan Senior.
‘While it’s true that some bad apples have abused this system in order to increase monetary gain at the expense of the tenant, this simply isn’t the case for the vast majority. Many landlords will now have to foot a larger bill for services that were previously shared between parties or paid for wholly by the tenant, further denting their profits, which have already seen a decline due to new legislation around stamp duty and tax relief,’ he added.