The build-to-rent brigade has fired the first real shots over the bows of the traditional letting agency sector, saying it faces wipe-out.
Harry Downes, founder and managing director of build-to-rent developer Fizzy Living, has expressed derision that so many agents point to the lettings fee ban as the biggest threat to their businesses.
While a few facts get in the way of his opinion piece, its tone is the unmistakable drawing up of battle lines.
The fees ban is apparently “due to come into force at the year’s end” – highly unlikely, of course, since as EYE reported on Friday it is not on the Government’s legislative timetable.
However, it is agents’ attitudes that are the real object of Downes’ attack.
He says that after the lettings fee ban, lack of new landlords came a distant second in worries for agents.
“Meanwhile, other challenges like internal inefficiencies and lack of capacity seemed barely on the agents’ radar,” says Downes
“What’s alarming about these results is not that agents find the removal of these charges – paid for by tenants in exchange for alleged services like referencing and inventory checks – inconvenient.
“Anything restricting income is obviously a problem for a business.
“It’s the fact such a large majority of agents appear to view this single issue as a substantially bigger threat than factors which could wipe out lettings agencies altogether.”
He goes on to say that many landlords face “demise”, having had “many financial privileges removed”.
Fortunately, build-to-rent seems to be the white knight for tenants, riding to the rescue – according to Downes, anyway.
“Developers, like Fizzy Living, are also challenging the hegemony* of the old buy-to-let models, attracting aspirational tenants who once would have paid top dollar to a traditional landlord.
“Ultimately, then, many landlords facing escalating costs may decide to get out while their portfolios remain profitable. If this happens on a big enough scale, lettings agents will be in trouble.”
Then there are other threats faced by traditional letting agents, including the apparently ‘fee free’ online models.
Downes continues: “Lettings agents also seem to overlook competition from online portals.
“Fee-free and often more accessible than their high street counterparts, brands like Purplebricks are rapidly expanding their lettings portfolios to accompany an already popular purchase arm.
“These could well make the middle-men of the rental world redundant in a few years.
“So, with lettings agents facing two existential threats, why are they obsessing over the loss of a single income stream?
“Clearly, these fees have ballooned out of all proportion.
“What was supposed to be a supplementary form of income, has become a lifeline.
“In a market where demand is high, lettings agents have exploited their positions as guardians of rental properties to charge tenants exorbitant amounts to do very little (some even work both sides of the deal), a practice fortunately being stamped out.
“But, in a weird twist of poetic justice, such greed has returned to hit them hardest.
“Yes, tenants are in many cases ripped off by agents, with little means of redress, and it is for them that I imagine the Chancellor abolished the charges in his last Autumn Statement [a minor point, he didn’t – he announced the abolition].
“But the fees have also acted as a panacea for lettings agents, providing them with short-term profit blinding them to the need to engage with a changing rental landscape.
“The agents were likely sleepwalking towards a cliff face and now the panacea’s being pulled, panic is setting in.”
The full blog is on City A.M:
http://www.cityam.com/274701/greedy-letting-agents-only-have-themselves-blame-thei
Downes does not reference where he got his 42% figure from, but it was the Fixflo survey, reported by us last month.
https://www.propertyindustryeye.com/lettings-fees-ban-will-be-our-biggest-challenge-say-agents/
* We were also a bit baffled by ‘hegemony’ and sent us chasing to the dictionary: it means domination.
Hang on, if this guy is the tenant’s saviour why is he charging tenant fees? It’s not my local market but expect rental pricing to be at least 10% over market and, to please landlords/shareholders, annual rent increases are to be expected too.
Get off your high horse mate.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Fizzy stopped charging any tenant fees 3 months ago. We have also introduced 3 year tenancies alongside standard 12 month Assured Shorthold tenancies. Our annual tenant survey recently returned a 97% approval rating – their words not ours.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
So what do you do when you have a tenant from hell? Try running a business for private landlords with that risk and have it all go pear shaped … you won’t last 5 minutes. Reckless business sense.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
“Purplebricks are rapidly expanding their letting portfolio”.
Know what I mean Harry that is not the case at all. Despite upping the recruitment the listings have flattened at best .Bricks barely give it a mention in their spiel.Its the elephant in the room
A mammoth 488 listings this morning !
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Laughable article.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Fizzy living needs a shake-up!
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
I don’t mind these guys in the market it was big enough, hence the fact that the large insurance and pension companies have piled in looking for a significant return.
I do however seriously object to the arrogance and conceit that accompanies them. “White Knight” riding to the rescue of the poor tenants. Give me a break. Are they some sort of social landlord? No, just another profit making business capturing an audience who may never become home owners but can become long term income streams for their businesses.
Taking advantage of the corporate tax benefits that they enjoy over “Mom& Pop” Buy to Let and crowing about it doesn’t serve to advance their cause.
Currently someone can rent a property in a block of rentals and owner occupiers and no one knows if it’s a rental. This is ” Housing association on steroids” and anyone who doesn’t believe there is still a stigma around renting has never rented.
I don’t want to appear too one sided, so let me just say ” If you ever want to be treated like a second class citizen. Just pop into your local high street estate agent and tell them you are looking to rent” Even when your rental budget dwarfs their annual salary.
There are no perfects in this industry.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
Mark, sorry you feel that way. Can I invite you to visit one of our buildings to meet our on site team? You certainly won’t feel second class.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
I am sure Fizzy Living are only out to make a profit like the rest of us, I have to say though the concept is very good and perhaps surprising that the big players in our industry are not more aligned towards build to rent. I think it is the way forward and unfortunately the average high street letting agent will be left dealing with the average landlord. I am afraid that a lot of what Harry Downes says is true of the industry.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
It appears that Harry Downes is not a letting agent nor does he understand the costings of running a lettings business. Yes letting agents are heavily reliant on tenant fees as an income stream to run their businesses OBVIOUSLY. But think of it this way, an agent creates an agreement between two parties regardless of the industry, then you are no longer allowed to charge one of the parties, that’s around 50% of your income stream. Then you have the short sighted that say “charge the landlord” how will the landlord afford it? especially with extra taxation, and increased legislation to adhere to. With tenants paying no fees then I worry what kind of service they will receive and a redress scheme available???
Sorry mrs tenant, the landlord can’t repair the boiler this month he has no money, wait til after Christmas, you and your children will have to boil up saucepans like in the good old days.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register
And you can’t leave as you are in a 3 years tied-in agreement. Oh sorry its not you that’s the problem but your nightmare tenant neighbour … sorry you stuck with them for 3 years! Your agent won’t mind as he get paid for the 3 years.
Oh you got a job relocation, sorry your stuffed unless you can afford to travel.
You must be logged in to like or dislike this comments.
Click to login
Don't have an account? Click here to register