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Categorized | Property

This is why millennials hate letting agents

Posted on November 25, 2016

Young people renting flats in London are easy prey for letting agents. Many of us endure the annual trauma of searching for a new flat, displaced by rising rents to cheaper parts of the capital. But every time we move, the agents profit from our pain.

This summer, after a long search, a friend and I made an offer to rent a south London property. The letting agent emailed us to outline the costs involved. As well as paying one month’s rent deposit and one month’s rent in advance, they charged us a one-off “admin fee”.

This came to more than £700.

I was reminded of the sheer violence of this fee at the Autumn Statement this week. There were cheers when the chancellor announced plans to ban tenants from paying them in future. That an agent can charge this much for a credit check and bit of photocopying reflects the distortions and imbalances afflicting an entire generation of the capital’s renters.

If London’s middle-aged are culturally identified by sitting around the dinner table discussing house prices, young Londoners are identified by standing around (there probably won’t be enough space to sit), discussing their experiences of letting agent extortion.

As well as the straightforward conflict between young and old, renting a flat in the capital is also a gladitorial battle between the young — and the even younger. In all of the flat searches I have experienced, I doubt I have encountered anyone over the age of 30.

Letting agents rely on unjustifiably high fees to maximise profits; they also rely on young, cheap labour, which they can entice with the promise of a kind of watered-down 1980s-small-broker-outfit lifestyle, complete with bonuses and a company car.

Pressed to pay the £700 fee and secure the property, my flatmate and I seriously deliberated about whether we should. A supposedly rational assessment of pricing does not make sense without a consideration of the context, which, being the London property market, undermines any faith in rationality or fairness.

In our case, the specific context was a dozen property viewings in a week — a kind of exhausting, modern-day picaresque tale with letting agents cast as villainous young friars (and the effects of monetary policy replacing the distant abuses of papal authority). This catalogue of mishaps and organisational disasters had left us in an extremely weak negotiating position.

A typical visit would unravel as follows. We would arrive at a flat in Brixton, advertised as having two bedrooms. One of us would realise there was only one bedroom. We’d point out that the flat had been advertised as having two. The agent would apologise and gesture towards the living room, which could “easily become a bedroom”. But this flat was advertised as having a living room, we’d reply. The kitchen, he’d say, with a further limp gesture, is “arguably a living room”.

One day at roughly 1pm, I received an anonymous call. “Thomas, I have some very bad news”, the caller began. He paused. Our 2pm viewing had been cancelled because someone had already put down a deposit. For any given flat, it was clear that if we had an issue with the terms or the fees, there’d be someone else who wouldn’t.

The £700 admin fee was nowhere near the most absurd moment in our hunt. After deciding to walk away, we discovered exactly the same property was on the market with another agent, who charged an admin fee of only £120. When we made an offer through that agent, the earlier agents rang us to complain. If we had made another offer through a rival agent, they explained, they would take legal action against that agent to derail the offer.

This kind of behaviour can be very profitable. Given the high margins currently generated by admin fees, it is no wonder that the share prices of several property groups fell so sharply this week. For landlords, the outlook is more complicated. I think the argument that agents will “pass on these fees” to landlords is questionable; landlords, unlike tenants, can simply choose a different agent. More importantly, the entire regulatory landscape is not prejudiced against them.

Ballooning letting agent fees have had an impact on the millennial balance sheet. When abolition comes, it will be welcome, but these fees are just one small, particularly vicious consequence of a vastly greater problem with the London housing market — part of an imponderable tapestry of dysfunction that makes up the modern city.

The UK’s capital is known for many things; but is in danger of becoming known for one. Last week, on a reporting trip in the Netherlands, I asked someone what their thoughts were on the Dutch housing market. Amsterdam was crazy, he told me, searching for the right words: “Like some kind of London.”

Thomas Hale is a markets reporter for the FT;; Twitter @TomHale_