Agents to be regulated - is this good for the industry?
The Conservative Party conference had a significant focus on housing and the most interesting takeaway for letting agents was the somewhat unexpected announcement that the Government is looking to introduce industry-wide regulation.
During his address, Communities Secretary Sajid Javid outlined several proposed policies for the Private Rented Sector (PRS). He stated that The Department for Communities and Local Government would change the law so that all letting agents will be regulated in order to practice and will also be required to register with an appropriate professional body. This would include agents being obliged to meet minimum training requirements and comply with an industry-wide code of conduct.
Here’s a summary of how it could impact the industry:
Improved public perception
If all letting agents have to adhere to a code of conduct and meet minimum training requirements, industry standards are likely to improve. This could have a positive impact on agents’ reputation among the general public, particularly if there is strong awareness of increased regulation.
Removal of industry’s criminal element
If all agents are required to undertake training and meet a code of conduct in order to operate then this could discourage criminal operators from remaining in the sector. If enforced properly, regulation could be responsible for a huge reduction in the remaining minority of criminals working in the industry.
More administration and red tape
One of the main reasons the Government has repeatedly given for not introducing regulation is that it would burden agents with unnecessary red tape and additional administration. There are several trade bodies and redress schemes in operation, so a coherent approach to industry-wide regulation is vital if it is to prove successful.
Higher costs for letting agents
The majority of agents already have several annual membership costs to consider, including redress schemes, trade bodies and local networks. If they are required to pay for additional training and membership of a national network, this could represent significantly increased annual costs. Add to this a ban on upfront fees charged to tenants and it may have a significant impact on the bottom line of some businesses.
Improved minimum industry standards
As Sajid Javid mentioned at the Conservative conference, anyone can currently be a letting agent. Therefore, the introduction of compulsory training alongside a code of conduct will improve the quality of agents at the lower end of the market and hopefully increase the average standard of service across the industry.
Lack of regulation enforcement
One of the consistent problems facing the introduction of new legislation is the lack of resources for enforcement. If nationwide regulation can’t be enforced it will be rendered pointless as agents will still be able to operate as they can now – with no qualifications nor code of conduct in place.
The Government’s proposals for regulation have been met with a predominantly warm reception from those within the industry, many of whom were quick to point out that they had supported the idea of regulation for years.
Isobel Thomson, Chief Executive of the National Approved Letting Scheme, said:
“The measures are welcome news giving clear confirmation that the Government is adopting a coherent, strategic approach to the PRS for the benefit of consumers.”
“The Fair Fees Forum called for both the fee ban and introduction of mandatory client money protection to be framed within wider regulation as the only way to ensure that all agents meet the same requirements and consumers are protected.”
“We are delighted that Government has listened. We look forward to engaging with Government to take forward the measures they have announced.”
David Cox, Chief Executive of ARLA Propertymark, said:
“After 20 years of campaigning falling on deaf ears, we’re very pleased the Government has taken the decision to regulate the PRS.”
“This will be the single greatest step forward in a generation, in terms of consumer protection for private tenants, and will do more to clean up the image of the industry than the hundreds of smaller laws and pieces of legislation introduced over the last 20 years.”
“However, regulation can take different forms and we need to see the detail of proposal to be confident that it will be effective.”
Glynis Frew, Chief Executive of Hunters and Chair of the regulation group on the Lettings Industry Council, said:
“The industry has been campaigning for these changes for years, but it is not surprising that our voices are now being heard.”
“I have seen so many people from the industry come together in their demand for more regulation – whether this be landlords, agents or redress and deposit schemes.”
“However, execution is key and whilst there is still a lot to do, the energy and positivity backing these changes is overwhelming.”
What happens next?
Well, there is not a lot to go on at the moment. However, Sajid Javid did suggest in his address that more details of the policies will be announced in the upcoming Budget on November 22.
As we have seen with the proposed ban on upfront letting agent fees charged to tenants, sometimes it can take a while for these measures to be enforced. Therefore, it wouldn’t come as much of a surprise if industry-wide regulation of letting agents wasn’t introduced until late 2018 or even 2019.
What we do know is that as the PRS grows larger still, the Government will continue to keep a close eye on its development and regulate it accordingly.