Private Rented Sector: the evidence from banning letting agents' fees in Scotland - Communities and Local Government Committee Contents

2  The evidence on the impact of the ban on letting agents' fees in Scotland

Overview of the submissions

10. This chapter examines the methodologies used to the produce the evidence we received and summarises the key findings put forward by the respondents which we consider pertinent to addressing the question about what impact, if any, the Scottish Government's decision to ban agents' fees has had on the overall costs and operation of the housing market in Scotland.[16] Our assessment of the evidence is provided in chapter 3.

11. The four submissions differ in the methods they use to answer the question about the impact of the decision to ban agents' fees, on what types and sources of data they use and on the timeframe they use to base their analysis.
Submission Methods used Time period analysis undertaken in the submission
Shelter ScotlandBDRC Telephone survey of letting agents

Mystery shopper exercise of letting agents

Survey of landlords

Follow-up interviews with landlords

Interviews with 'experts'

Survey of tenants

Dec 2013-Feb 14

Nov-Dec 13

Dec 13

Jan 14

Jan 14

Dec 13-Jan 14

Rettie Statistical regression analysis of data on economic performance (from the Scottish Government); employment and unemployment (from Office for National Statistics' Labour Force Survey); pay for full-time workers (from Office for National Statistics' Annual Survey of Hours and Earnings (ASHE)); number of households (from National Records Scotland); the proportion of dwellings in private rented sector (from Scottish Household Survey); the number of mortgage loans (from Council of Mortgage Lenders); house prices (from Registers of Scotland)

Analysis of Office for National Statistics' Index of Private Housing Rental Prices (IPHRP)

Analysis of rents data from Citylets; HomeLet Rental Index; MoveWithUs Rental Index

Analysis of Companies House data

1963-Dec 13

Jan 11-Dec 13

Jan 04-Dec 13

Oct 12 and Jan 13

Scottish Association of Landlords and the Council of Letting Agents Survey of members

Analysis of rents data from Citylets

Aug 14

Apr 10-Apr 14

National Landlords Association (NLA) Analysis of rents data from 'Your Move'

Analysis of rents data from HomeLet Rental Index

Benchmarking exercise of letting agents in one area in Scotland

Feedback from NLA members

Jul 13 and Jul 14
Generation Rent Analysis of rents data from Lettingweb

Analysis of Shelter's research

Jul 10-Jul 14


12. The submission by Shelter Scotland was based upon two reports which it commissioned from external organisations.[17] The first, "The impact of legislation on letting agents fees in Scotland: quantitative analysis", was produced by Rettie and Co., an independent firm of property specialists based in Scotland.[18] The second report, "The impact of clarification on letting agent fees in Scotland", was produced by BDRC Continental, an independent research consultancy.[19] On the basis of the research in the reports, Shelter Scotland stated that there was "no conclusive evidence" that the ban on fees in Scotland led to an increase in rents. It said that the "independent analysis found that other market pressures were far more likely to have contributed to rising rents in the private rented sector".[20] Shelter summarised the findings in a blog:

·  landlords in Scotland were no more likely to have increased rents since 2012 than landlords elsewhere in the UK;

·  fewer than one in five of the letting agency managers interviewed as part of the research said they had increased their fees to landlords; and

·  many landlords opted to absorb any increase in their letting agency fees as opposed to passing it on in full.[21]

Shelter added what we have taken to be a qualification that

    while this research was extremely rigorous, it still did not reveal all the answers. One part of the research showed an unexpected 1-2% rise in Scottish rents, although it could not conclude to what extent the ban had, or had not, contributed to this rise. Other sections of the research suggested wider economic factors were clearly a larger contributing factor. Ultimately, it is extremely difficult to disentangle what factors drive changes in rent levels'.[22]


13. In their joint response the Scottish Association of Landlords and its letting agent division, the Council of Letting Agents (CLA), reported findings from a survey they had conducted of 103 CLA members in Scotland and an analysis of average monthly rents taken from data provided by Citylets.[23] The majority of respondents to CLA's survey appear to have seen no impact in terms of increased rents, the charging of fees to landlords or the introduction of new charges to tenants. However, a considerable minority of members reported impact on the following areas:

·  20% reported an increase in rent as a result of the change;

·  9% reported the introduction of other fees for tenants;

·  34% of respondents had started charging fees to landlords that tenants previously paid; and

·  23% had increased management fees charged to landlords.

14. Data on average monthly rents from Citylets were reported to show an increase in average monthly rents in Scotland by £18 (to £672) between the second quarter of 2010 and the second quarter of 2012, with a further increase of £51 from the second quarter of 2012 to the same period in 2014. In its submission, the Scottish Association of Landlords noted that, while "this increase cannot purely be attributed to tenant fees legislation as there are a number of other factors influencing market rent [...] it is realistic to suggest that at least in part the increase has been due to the legislation".[24]


15. The submission by the National Landlords Association cited two main sources. The first was data on average rents from "Your Move" and the second was data from the HomeLet Rental Index, which is gathered from HomeLet's tenant referencing service.[25] The National Landlords Association said data from Your Move showed that that average rents in Scotland had increased by 2.3%, with the fastest annual increase in the South of Scotland, where the average monthly rent in July 2014 was 4.8% higher than in July 2013. It believed that this increase was "due to" the Scottish Government's decision to introduce a ban on fees and "the letting fee still exists but has been transferred into the rent; tenants are now paying a higher rent".[26]


16. The submission by Generation Rent cited data from a number of different sources including the research undertaken by Shelter, rents data from Lettingweb and findings from other surveys that were not specified.[27] Citing data from Lettingweb, the submission outlined a rise in the cost of private renting of an average of 6.9% between 2010 and 2014. However, it supported the view attributed to Lettingweb that this rise was due to increased population and a lack of supply in the private rented sector and concluded that "the change [by the Scottish Government] has had no effect at all on rent levels". Although stating that Shelter's report was the most comprehensive undertaken, Generation Rent said that "there has been no research that shows a causal link either way between ending lettings agents' fees for tenants and a rise in rents".[28]

Concluding assessments

17. The four submissions were divided in their assessments about the impact of the decision to ban fees in Scotland and some of the evidence came with caveats.

16    Back

17   See letter from Shelter Scotland to the Chair, 29 October 2014, in . Back

18   Rettie and Co., The impact of legislation on letting agents fees in Scotland: Quantitative analysis, March 2014 Back

19   BDRC, The impact of clarification on letting agent fees in Scotland: Research report prepared for SHELTER, March 2014 Back

20    Back

21   "What's really happened to rents in Scotland?" Shelter policy blog, accessed March 2015 Back

22   "What's really happened to rents in Scotland?" Shelter policy blog, accessed March 2015 Back

23   Letter from the Scottish Association of Landlords to the Chair, 8 October 2014, in  Back

24   Letter from the Scottish Association of Landlords to the Chair in  Back

25   Email from the National Landlords Association to the Committee, 27 October 2014, in  Back

26   Email from Generation Rent to the Committee, 30 October 2014, in  Back

27   As above  Back

28   As above Back

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Prepared 20 March 2015