In this Natter we have an exclusive interview with David Cox, CEO of ARLA Propertymark and one of the best-known figures in the property industry. Before the recent rebrand, David was Managing Director of ARLA, a role he’s held since January 2014. A trained barrister, David also worked at the National Landlords Association (NLA) for five years as a Policy and Senior Policy Officer.
He also worked as a parliamentary adviser and a Crown Court Clerk before entering the world of property.
His career so far has involved associations with Whitehall, Westminster and the EU, as well as three trade associations, and he is someone who is hot on policy, complex legislation and public affairs, combining his legal and property knowledge to lobby the government on behalf of letting agents across the country.
So, without further ado, here are those questions.
How has ARLA been planning for the ban on letting agents’ fees charged to tenants? Was it a shock when it was announced?
A ban on letting fees has been on the horizon for a long time: Scotland banned them in 2012, Shelter, Citizen’s Advice, Generation Rent and Crisis have been campaigning against them for years, the Labour Party included a ban in their 2015 General Election manifesto, Sadiq Khan was elected as Mayor of London on a pledge to ban fees in London, with similar calls being echoed by the Liberal Democrat and Green Mayoral candidates. Even the Conservative candidate, Zac Goldsmith, branded them ‘almost a scam’. Numerous unsuccessful Private Members Bills have been laid before Parliament banning fees. Vicky Spratt, Features Editor of The Debrief, gained over 258,000 signatures to a petition calling on the Government to ban fees.
As I have said at the last two ARLA Conferences – it was a when, not an if. So ARLA Propertymark has been planning for well over a year. During the early part of 2016, we engaged members in surveys, gained feedback on views at ARLA Propertymark Regional Meetings, Conferences and through the Regional Representatives network, held discussions with key stakeholders and had panel discussions with leading experts. This allowed the ARLA Propertymark Board to finalise our policy position and campaign strategy in July 2016.
At the same time, the DCLG Affordability and Security Working Group was set up. We spent the summer of 2016 building a coalition of organisations to support our proposal to ban upfront fees and spread the costs of these essential services over the first six months of the tenancy and put the recommendation to the Affordability and Security Working Group when it met last September. It was during the work of this Group that, out of the blue, the Chancellor announced the banning of fees in the Autumn Statement.
Out of courtesy and under strict embargo, ARLA was notified the day before in order to give us time to prepare our response and I spent from 4:30am until 1pm on Autumn Statement day at BBC Broadcasting House in London doing radio and television interviews; as well as speaking to a host of other national and regional media. Since the announcement, we have undertaken a survey of over 1,000 letting agents on their fees, put a full policy paper on our proposal to spread the costs for these essential services over the first six months of the tenancy to Government, met with numerous MPs and civil servants, spoken with the Housing Minister directly and engaged our members to contact their local MPs to explain how this ban will impact on their businesses.
At ARLA Conference last week, we launched the next phase of our campaign which was building an evidence base on the economic impacts of the ban. We engaged a leading research consultancy, Capital Economics, and their research found that the residential lettings sector turns over around £4billion per year and employs some 58,000 workers; fees charged to tenants generate around £700 million per year or approximately 20% of the industry’s turnover.
On a comparable basis, fees for buying a house are higher than fees for letting a home and at £206 per person on average are lower than in other major economies. For example, our neighbours across the Channel are capped at 12 Euros per square metre or £416 for a 40 square metre Parisian apartment and tenant fees in the USA equate to one-months’ rent; an average of $1,404 dollars or £1,132.
The report makes a clear recognition that real work needs to be undertaken and that these costs need to be recovered and Capital Economics note that letting agents may take the hit themselves but are more likely to redistribute their loss to landlords through higher fees.
They predict that if an outright ban is enacted, the most plausible outcome for the market is that agents stand to lose £200 million in turnover and around 4,000 jobs will be lost in the sector, landlords will lose £300 million in income, and tenants will pay an increased rent of £103 per year.
They note that as rents will increase by less than the average tenant fees, this will be positive for tenants but I leave the most interesting finding until last. Those tenants who move more frequently will enjoy savings on overall costs but those who don’t move so often, which are likely to be lower-income families, those Just About Managing, will see a loss. For tenants to make a saving from this policy, they would have to stay in their home for less than 2½ years. And watch this space because there’s more coming.
Can you explain the thinking behind rebranding NFoPP to Propertymark?
The National Federation of Property Professionals (NFoPP) was the underpinning company for the professional bodies of ARLA, NAEA, APIP, NAVA and ICBA. It was never designed as a public-facing entity. The industry knows who ARLA and the NAEA are and what we do, but the general public – landlord, tenants, buyers and sellers – had very low awareness.
Therefore, after months of careful research it was decided that we needed to bring together all the specialisms of NFoPP into one, consumer-facing, identity. We engaged branding experts to replicate the trust and confidence which consumers place in the travel industry’s ABTA and ATOL, , and help us arrive at a new name, identity and culture. After two years of work, on 8 February 2017, NFoPP was reborn as Propertymark; moving the organisation from industry-facing ARLA / NAEA Licensed to consumer-facing Propertymark Protected.
However, to ensure those who join ARLA Propertymark or NAEA Propertymark are receiving the advice, benefits and services tailored to their property specialism we have maintained the existing divisions as the industry-facing professional bodies
Is it fair to say that NFoPP/Propertymark doesn’t currently have the consumer awareness that it should?
Our research shows that consumers did not know what NFoPP was or what it did. Indeed, many in the industry had difficulty explaining the difference between NFoPP and the professional bodies. Therefore, from now on, Propertymark protects consumers and regulates members; with the professional bodies providing advice and guidance, serving their members’ needs. It is important consumers are engaged in the property market; many don’t know the risks of using rogue agents, or the benefits of using a professional agent, so Propertymark has a wider educational role as well.
Were you pleased with the ideas put forward in the Government’s White Paper?
For the private rented sector, the White Paper was more of a re-statement of existing policy rather than a new direction. There is a chronic shortage of housing and build-to-rent will go some way towards alleviating that. Institutional investment in the private rented sector is not a threat to landlord or agents. Even in countries like Germany, which is held up as a world-leader in institutional investment, the private rented sector is still dominated (c.60%) by small landlords. We were also pleased the Government chose not to overhaul the tenancy regime and introduce minimum three year tenancies.
Controversial changes to mortgage interest tax relief are nearly upon us – how can agents help their landlords to adapt to the new landscape?
Throughout the second half of last year and first half of 2017, ARLA has had tax accountants speaking at regional meetings across the country in order to give agents the knowledge necessary to explain the changes to their landlords and encourage them to amend their business plans accordingly.
We disagree with the Government’s changes to Mortgage Interest Relief but despite heavy lobbying by us and a large number of other organisations, the Chancellor and HM Treasury have stood firm.
Do you feel that industry trade bodies are unfairly criticised by their memberships?
Whenever I speak to members at events, conferences and one-on-one, I ask four questions:
1. What do we do well?
2. How can we improve?
3. What do we do that we shouldn’t be doing?
4. What do we not do that we should be doing?
The industry is ever-evolving and to ensure we are relevant and serving our members appropriately, we need to change with it. To do so, we need feedback, both positive and negative, and I hope members have seen over the last few years that we have been changing, improving and adapting to ensure we are there to provide what members want.
What does ARLA have planned for its members in the coming year?
This year is about getting Propertymark into the market and helping members through this change to build brand awareness. We have a big campaign planned for the autumn once members have had time to change their windows, stationery and marketing assets.
Alongside this, we will be continuing our campaign on letting agent fees; lobbying to gain the best deal for agents that we can, as well as continuing to put pressure on Government to reverse the recent tax changes and introduce appropriate regulation of the sector.
What are your views on criticism of ARLA/NAEA for accepting member firms which consistently disparage the business models of the core membership in their advertising?
The internet changed the world forever. It opened people’s eyes and made them think they can do anything at the click of a button. The travel industry ignored this and the result was the decimation of the high street travel agent. The property industry needs to learn from this and ensure it doesn’t make the same mistake. An agent is an agent; online, hybrid or traditional, if you comply with our rules, you can join our membership.
A significant part of your role is lobbying politicians and policy makers – do you find this frustrating or rewarding?
Changing government policy is like moving a mountain one pebble at a time. You have to chip and chip away. As Alistair Campbell said in his ARLA Conference speech in 2015 – “when you are sick to death of saying something, it is only just reaching the outer edges of public and political consciousness”. We have had many successes; most notably Client Money Protection (CMP). Seeing our mandatory CMP amendment enshrined on the Statute Books in the Housing and Planning Act 2016 is a great sense of achievement when you consider it all started 18 months earlier, with Baroness Hayter and I, drinking coffee out of polystyrene cups in the middle of the Exhibition Hall at Labour’s Party Conference in 2014.
You’ve worked for the NLA in the past. How has working on the other side of the fence helped you in your current role?
As a trained barrister who had worked in Parliament for nearly two years and seen lobbying from the other side, the NLA taught me how to be a lobbyist. I was in the cut and thrust of the issues that affect landlords. In my five years at the NLA and through my work with the International Union of Property Owners (UIPI) I met thousands of landlords. Landlords are agents’ customers and so this knowledge has helped me and the ARLA Propertymark Board look at issues wider than those which just affect agents and show to landlords their agents are standing with them when times are tough (
How do you view the controversial Right to Rent scheme one year on from its introduction?
When it was first announced, Right to Rent was enshrining best practice into law. However, as with a lot of legislation, when it got down to implementation, it changed significantly. The Government’s mandate was clear, they wanted to deal with illegal immigration, but making landlords and agents de facto border guards was probably not the best way.
The scheme could work if it was properly enforced but those who are declined because they are unlawfully in England will still find accommodation from those who operate under the radar.
Apart from the obvious topics detailed above, what do you see as the biggest challenge facing the modern letting agent?
The pace of change; be it UK Government legislation, global forces on the international stage, new business models, changing markets or an increasingly diverse and demanding client base. The world is changing faster than it ever has before and unless agents chart a safe course they will end up falling behind. But I can assure you, ARLA Propertymark will do everything it can to help shape that course and aid agents to navigate the uncertainty and change in the industry.
Great answers, David. Thanks very much for your time.
If you have any comments about this Q & A, please pop them in the comment section below.
Until next time…
*Nat Daniels is the Chief Executive Officer of Angels Media, publishers of Estate Agent Today and Letting Agent Today