Labour’s Shadow Communities and Local Government Secretary, Hilary Benn MP, has this week attacked lettings agents as being a ‘rip off’.
He was being interviewed on the subject of the UK lettings market primarily in relation to the question of fees levied by agents to prospective tenants.
Referencing fees and administrative costs can be high with some agents asking for £200 or more, often per tenant. They will charge additionally for documentation preparation, inventories etc too.
Mr Benn’s solution to the ‘injustice’ of such agency fees is to propose that an incoming Labour Government would set limits on them. Intervention in the market by central Government in other words.
Some would say that this is dangerous meddling by bureaucrats in the private sector.
And some will have sympathy with the idea, particularly regular renters of residential property who are fed up with paying through the nose in order to secure accommodation.
Our own view is that once the powers that be start getting involved in markets in order to ‘kerb’ them by way of manipulation, it effectively takes control away from the natural order of supply versus demand and puts that influence, quite unnaturally, in the hands of the autonomous to fabricate the market and often to their own political ends.
Don’t lettings agents charge what they charge because the market will stand it? Once it can no longer do so, and when the supply versus demand balance shifts, fees will quite obviously reduce naturally.
And the same applies to rent controls. Former Labour Mayor of London Ken Livingstone advocated rent controls and even state run lettings agents. Hilary Benn has ruled out such measures if elected to office but has supported the consideration of linking private rental costs to inflation. A sort of ‘socialist lite’ approach.
Again, we understand the appeal of lower rents for all. But what of the unintended potential consequences of a property market that, whilst somewhat diluted in terms of volume of transactions, owes a sizeable part of its activities to speculative landlords buying properties as investments for the purposes of ‘buy to let’.
Will a professional landlord venture to buy residential property in order to gain a long term rental if that rental will have its natural extent curtailed? We doubt it.
The real world impact of such a consequence is sure to weigh heavily on a beleaguered sales market and which is in need of revitalisation, not further downward pressure.
The UK economy, we firmly believe, benefits from a buoyant housing market. A gradually rising equity in one’s home is a distinct feel good factor and encourages consumer spending and economic activity. Suffocating the property market in the way that is perhaps inadvertently proposed by Hilary Benn and his colleagues may appeal to some short term renters. However the effect may be to burden the economy still further and, ironically, lead to a shortage of rental stock at the same time.