When Ken Livingstone’s idea of setting up a not-for-profit lettings agency first surfaced I have to admit I thought it was interesting but hardly a world beating proposal. Since then I have not only warmed to the idea as a way of protecting tenants and stopping lettings agents from manipulating the market for their own ends but have also found that it really strikes a chord people who are amongst the many thousands using agents every week. It has obvious advantages for tenants but landlords will also benefit: they feel let down and ripped off by agents as well.
The private rented sector is crying out for regulation. Given that social housing and low cost home ownership are increasingly inaccessible, especially to younger people, we desperately need private renting to be successful and offer a fair deal for both parties. As an industry it has to be dragged kicking and screaming into the 21st Century, it has to be modernised, professionalised and made subject to enforceable codes of practice.
I should say now that I know that some agents do behave ethically and have good standards and want to provide a decent service at a fair price. They voluntarily sign up to existing codes and I welcome that. But it is also a fact that landlords and tenants have endless complaints about what many agents do: their increasingly flash High Street premises cover up appalling inefficiency, bad practice, and self-serving behaviour. When they are charging the landlord 8, 9, 10 or even 11 per cent of the first year’s rent simply for finding the tenant and setting up a standing order, you realise that margins are too high. Landlords could get their service from a not-for-profit ethical provider for a lot less: this would either improve the landlords’ margin or, better still, reduce the rent.
Tales from the coalface. A landlord is getting a good rent from a good tenant on a one year Assured Shorthold. The tenant pays regularly and looks after the place. The landlord does repairs promptly and responds quickly to any concerns raised. The agent, who found the tenant, charges 11% for doing that and monitoring the standing order payment: their share is deducted up front so they get paid in full before the landlord sees a penny. As the tenancy comes to an end, the agent tells the landlord that in current market conditions a 25% increase in rent is achievable. The current tenant refuses to pay that much extra and decides to move. The landlord, encouraged into avarice, agrees to put it on the market at the much higher level. But in this case it is bullshit, the agent is trying to talk up the market and knows it will get 11% of the rent for a new tenant but their fee drops to 8% if the existing tenancy is renewed. In the market, the new higher rent is unachievable; offers received represent an increase but nothing like 25%. But then it is too late. The tenant is gone, the flat is empty, and increases are below expectations. Even when a new tenant is installed, the landlord loses money over the year because a month’s rent has been lost and they’re paying the higher agency fee. The old tenant has lost a home they liked. The only benefit is to the agent.
A second tale from the coalface. Two young professionals are looking for a flat. After many viewings they find what they want, move quickly and put on a holding deposit. They think that means they have secured the flat but know they will lose their holding deposit if they do not close the deal with references and guarantors. Unbeknown to them, the agent continues to show the flat to others and eventually gets a better offer. The young professionals are flatly told they have lost the flat and they will get their deposit back in due course. They have no recourse in law or otherwise: the agent says it was nothing to do with them and the landlord got the extra offer through another agent.
So partly this is about bad practice and partly it is just the poor system and the lack of regulation to blame. In the second case, for example, the role of holding deposits should be defined and should mean something specific.
An ethical not-for-profit agency would operate to clear standards. Action would be taken against landlords and tenants who fail to perform to the requirements. There would be clear rules and expectations and transparency about what is going on. Good existing agents would still be able to compete on price and could offer the same terms and rules. But no landlord and no tenant would have any incentive to go to a rogue agency that serves itself. Over time, the system should be backed up by legislation to fix good practice into law. The market would operate much more efficiently.
So its a great idea. A practical proposal that will make Londoners’ lives better and easier. And when Boris Johnson and the agents’ lobby say the market will collapse if it is interfered with, tell them where to get off.