The 2019 Tenant Fees Act, which over the past five years has severely restricted what fees landlords and letting agents can charge tenants, has been a success, two academics have claimed.

Economists Professor Jan David Bakker and Assistant Professor Nikhill Datta say that the legislation, which was brought in by the Theresa May-led Conservative government, has seen some agents pass on their lost fees revenue to tenants to their landlords.

Nevertheless, they hail the legislation as having been a success, saving renters on average £400 per tenancy, and highlighting how it hasn’t led to landlords switching letting agencies in large numbers or property firms going bust.

Bakker and Datta say that predictions by Capital Economics in 2019 that the Tenant Fees Act would lead to rents rising by around £108 a year on average, and that 16,000 agents would lose their jobs, have not come to fruition.

Three reasons

They pin this on three unique features of the UK’s private rented sector. Firstly, tenants don’t pay attention to fees when selecting a property, usually because they’re often hidden in the depths of agents’ websites and not easy to understand.

“In many cases, tenants only learn about how much they have to pay after having chosen a property and when signing the contract,” the two academics say.

Secondly, "tenants are heavily influenced by rental prices, making it harder for landlords to pass increased fees on to them.

And [thirdly] "competition among letting agents is such that it only allowed them to pass on a fraction of their losses".

Their research proves, they claim, that ‘meddling in competitive markets’ with regulations like the Tenant Fees Act does not damage them, as is often claimed.

Bakker works at Bocconi University in Milan while Datta is based at Warwick University.