Renters Reform Bill a ‘hand grenade’ for student let sector

Renters Reform Bill a ‘hand grenade’ for student let sector

15:53 PM, 26th July 2022, About 2 months ago 34

Text Size

The controversial Renters Reform Bill could destroy the student-let sector. The ban on fixed-term tenancies will mean landlords can no longer guarantee spaces to new students at the start of the next academic year. Richard Reed reports.

Fixed-term lets have been the norm for university students for decades. They move out at the end of their final year, and a new group moves in.

Yet all that is about to change in the Renters’ Reform Bill, thanks to astonishingly short-sighted government policy that will ban fixed-term lets.

The result, warn housing experts, is that landlords will pull out of student accommodation – creating a severe shortage.

They say the ending of fixed-term tenancies and the abolition of Section 21 evictions will make it impossible for property owners to be sure flats are empty for the following year’s cohort of students.

The only exemption in the Bill is for purpose-built student accommodation (PBSA) – creating a bizarre anomaly in the market.

Student housing charity Unipol says there is already a shortage of student digs, with new PBSA not coming on stream at anything like the expected rate.

Combined with an existing fall in the number of privately rented houses in multiple occupation (HMOs), the charity warns the situation could deteriorate sharply.

“I think it’s daft, if I’m honest – I don’t think it’s been particularly well thought through,” says chief executive Martin Blakey.

‘It won’t work for the student sector’

“We don’t think it will work for the student sector, it’s as simple as that. It’s an academic cycle, so if landlords are not certain they can re-let for the following year, that accommodation will be very difficult to let. In certain parts of the country where you have very tight housing supply, that will have quite a dramatic effect.

“The people at the sharp end of this will be Bristol, Brighton, York, Nottingham, where any contraction in supply will be problematic – and it’s problematic now. Students are already finding it difficult to rent.”

He said there was an apparent contradiction in the bill, in that PBSAs are exempt and can impose fixed-term contracts on students.

“It kind of implies that students don’t know what they’re doing, and then a bit later on implies they should just be treated as normal tenants like everyone else. I’m not sure you can have it both ways. I’m not sure why students are special in PBSAs but not outside of it.”

Scottish system not working

Mr Blakey says evidence from a review in Scotland, where similar provisions were introduced in 2017, showed the system wasn’t working.

“The conclusion of that research is that many landlords in Scotland have moved out of student housing in HMOs. The recommendation is that the Scottish parliament should revisit that, because it’s having a serious effect.”

Simon Thompson, managing director of leading student lets website Accommodation for Students, agrees that evidence from Scotland shows such a move would be a huge mistake, and says the proposal is “a cause for concern for students”.

“The role of the student landlord is vital, both in providing an affordable accommodation option and, as our research shows, an essential part of the university experience,” he states.

“We have seen the impact of a similar change in the law in Scotland already, with students struggling to find suitable accommodation in cities like Glasgow. It is, in my view, vital that an exemption is made for student landlords; if it is not, a significant number of students will struggle to find affordable accommodation in the future.”

Unipol’s Mr Blakey believes the obvious solution is to make all student accommodation exempt from the new legislation and allow fixed-term contracts. Students would be easy to categorise for legal purposes, as there is a clear definition for Council Tax purposes in the 1972 Local Government Finance Act.

He points out that private landlords top the satisfaction rankings, with the best probably having just one or two houses. “It would be tragic to lose them,” he adds.

In addition, he warns that new PBSAs are being completed at an alarmingly slow rate, with next year’s numbers down to just 20,000 bed spaces from an expected 30,000.

“If you’re really interested in supporting students you would go for that and say ‘yes’, because there is a problem if next year’s students don’t know where to live, or if the housing supply gets smaller – and it will get smaller; it is already.”

‘Doesn’t work for landlords or renters’

Ben Beadle, chief executive of the National Residential Landlords Association (NRLA), also condemns the proposed ban on fixed-term contracts for student HMOs.

“It just doesn’t work for landlords and it doesn’t work for renters because you are going to have no certainty that property will be available when people need it,” he explains.

“At the moments students start looking in January or February, you secure it, you sign up, you know you are moving in July, August or September, and that property is ready for you.”

Like Mr Blakey, he highlighted the inconsistency of singling out PBSA for an exemption when more than 30% of students live in HMOs. “This is going to cause significant problems and I’m not sure what issues it’s trying to solve,” he added.

“I get with the wider white paper it is trying to resolve insecurity. I understand the logic for it. But the reality is that students don’t need the security – the student market is incredibly cyclical from summer to summer.

‘The outlook on this group is simply wrong’

“Typically a second-year student leaves halls and goes straight in to the privately rented sector. If you’re lucky you might get them to renew or they might move in with other housemates in a different property. But after that they are leaving university, they are going to get a job, they are not going to want to stay in a four- or five-bed HMO beyond their university life. The outlook on this particular group is simply wrong.”

Mr Beadle said the proposed ban would mean landlords would have no certainty that a property would be ready for the following year’s students, which could see many providers leaving the sector, creating a shortage and pushing up rents.

“I can’t think this is going to help the affordability by launching a hand grenade on the sector and expecting it to work as well as it does,” he added.

“This is an area where the government needs to look again. We think there should be two things: we want students to be exempt, or more accurately given parity with the PBSA market; and we want the ability to get property back at the end of the term, leaving it to landlords and tenants to create a fixed term of some description.”

Both the NRLA and Unipol said they would be lobbying the new housing minister in the next prime minister’s administration for changes to the bill on student accommodation.

 Do you own student accommodation? What are your views? Let Property118 know and post your comments in the forum.



Comments

Kim Hitchman

17:15 PM, 26th July 2022, About 2 months ago

Unbelievable. Illustrates a complete lack of Government understanding and research into a market that already functions well for both students and landlords. Students are well protected by HMO licenses with regards to safety and quality of properties. If the same exemption is not granted to HMOs as has been to the PBSA then I will be withdrawing my HMO, along with many more landlords, and the sector will collapse. Students will bear the brunt of this misguided policy change, chasing fewer available rentals and consequently suffering rent increases. Generally PBSA is more expensive to rent. There have been no rent increases on my student HMO for the past few years despite having to fund ever increasing compliance legislation. It makes me wonder if the government wants to phase out private HMOs in favour of a corporate take over of the student accommodation market. I hope NRLA and Unipol will influence the government to see sense and do the right thing. Private landlords have made a valuable and much needed investment into this sector over the years, to disrupt this business model to the point of non viability is a kick in the teeth. KH

Bristol Landlord

7:47 AM, 27th July 2022, About 2 months ago

“It makes me wonder if the government wants to phase out private HMOs in favour of a corporate take over of the student accommodation market.”

No need to wonder, it’s crystal clear what the government is doing, it wants to phase out all private HMOs, and private landlords, in favour of a corporate takeover of the entire Private Rented Sector, they want it all.
They corporatised the railways, are in the process of corporatising the NHS and have now started on the PRS. This is not a conspiracy theory, it is actually happening before our very eyes, and just as the corporatisation of British Rail was a disaster, with worse service, more accidents and higher prices, so will be the corporatisation of the PRS. We are already seeing the effects on tenants and landlords, less choice and higher rents.
Due to the War on Landlords we are now left with a choice, raise rents or leave the sector. Tenants are also left with a choice, pay more rent or go live in a cardboard box on the pavement.
You get the government you voted for, a majority of Brits voted for a fascist government and so this is what you now have.

Danbec Property

10:04 AM, 27th July 2022, About 2 months ago

Reply to the comment left by Bristol Landlord at 27/07/2022 - 07:47
So true, well said that landlord!

cashcow

10:41 AM, 27th July 2022, About 2 months ago

Reply to the comment left by Bristol Landlord at 27/07/2022 - 07:47
Another landlord backing your theory. It happens to all businesses that starts to do well in private hands who are then taxed/regulated to the point of having to sell thus coughing up CGT to the same government that sold us out to the tax advantaged corporations who will be the only landlords/businesses left.

Annie Landlord

11:19 AM, 27th July 2022, About 2 months ago

Scotland banned S21 and bought in indeterminate tenancies a five years ago. As already mentioned, a recent report - Rent Better (April 2022) - concludes that the changes have improved renters' rights but reduced rental supply, particularly for low income people. Scotland continues to have a tragic shortage of family housing but every spare parcel of land in Edinburgh is being given to developers of PBSH. PBSH providers are allowed to use academic year tenancies, which enables the owners to make a killing, renting out the rooms to tourists, specifically for the international festival in August.

Joanna Fear

12:06 PM, 27th July 2022, About 2 months ago

I appreciate the potential problems and believe student letting should be exempted from this legislation but we have had student properties for over 30 years and have never had a tenant seek to stay on. So much so we gave up serving notice to terminate the tenancies many years ago. Was this naive and have we just been lucky? Do most student landlords serve the notices as a matter of course? Even if the notice has been served if the student(s) decided to stay put there is nothing that could be done to get the new group in as a possession order would be necessary so is this going to be a lot more risky?

Yvonne Francis

15:24 PM, 27th July 2022, About 2 months ago

Reply to the comment left by Joanna Fear at 27/07/2022 - 12:06
Like you Joanna I too have let student houses and never had anyone stay on. The nature of a Joint and Severally liable lease would mean they would all have to stay to make the tenancy viable.

However its not just the problem of students staying on but their entitlement to leave at any time especially at the end of their University term, which in my case, as University terms are only 8 weeks, my house could be empty for months.

In Scotland I thought agents took on new tenants in the same way i.e. November or December, and if they failed to get vacant possession in the summer they found the new group alternative accommodation. It makes my mind boggle! especially as a self managing landlord so I would have a try at professionals and see how I go. There are so many other problems anyway like EPC standards that perhaps the writing is on the wall. It's a real shame as I believe students love private houses where they can live independently with their friends. A tenant of mine once told me her year at my property had been the happiest of her life.

Ofer Moses

16:37 PM, 27th July 2022, About 2 months ago

Reply to the comment left by Bristol Landlord at 27/07/2022 - 07:47
Which Government or party do you think are interested in appreciating and protecting the PRS?

Martin Thomas

21:46 PM, 27th July 2022, About 2 months ago

I wrote to my Conservative MP about this as we let to students and again, we don't serve S21 notices. His response was (predictably) to support the ministerial position although the reason was quite ridiculous - because students with a family need to be protected. Well that must account for about half a dozen tenancies throughout England then.
What a shower this government is.
I agree with the comments that the government seem intent on corporatising the sector.
If only there was someone else to vote for.

LordOf TheManor

23:14 PM, 27th July 2022, About 2 months ago

It'll be the poorest students who lose out - so that's goodbye to social mobility and any 'levelling up' agenda.
Not every student can or wants to afford Bristol PBSA's cheapest accommodation at £800 a month as charged for the recently ended academic year. One of the students who collected keys from me on 01 July said her room had no window so she had no idea from her basic 'pod' what the weather was like at any time of day.
2,500 students come and go through the same front doors and access the high rise wings of the building via lifts - that haven't worked since she arrived as a fresher last October. The stock answer (on repeat) was that the parts aren't available so there is no repair planned. She was told to get over it and told to quit complaining because NOTHING was going to be done about it.
I house mostly NHS students after they leave halls. They're happy with my 4-person houses because I offer them a 12 month tenancy renewal after their initial year with me at the original rent. It means they don't have to move during the summer of their second year when many are still 'on placement' which cannot be assumed to be in Bristol when the start of their second year begins.
All NHS night & days shifts are 12 hours - have been for several years - and some students only get 6 weeks off before their third year starts. Moving during the summer of an NHS second year course is therefore a foreseeable nightmare. It means continuity is a great thing for both parties.
I don't provide a two-year contract from the outset because a) it depends on the household compatibility as sharers which is an unknown at the start of it, b) the reality that some students don't make the required grades the first time around and either drop out or rely on summer re-takes and c) some experience a change in family circumstances back home and have to leave their course involuntarily.
Council Tax exemption for students ends the day after their final year three exam and becomes payable until their accommodation contract comes to an end. If there is to be 'no contract end date' the government needs to ask ITSELF how it intends to manage this.
Council Tax billing has the date of every student's last exam - and bills duly arrive for them well AFTER the students have long since left for Ibiza - calculated until their tenancy end date, which is also known to Council Tax billing by way of the retrospectively informed start date of the incoming students.
Endless student tenancies? Really?
Gov.uk: I wish you the best of luck with this muck and fuddle of your own creation. Don't expect any assistance from me with your tax collections! It won't happen.
Lord

1 2 3 4

Leave Comments

In order to post comments you will need to Sign In or Sign Up for a FREE Membership

or

Don't have an account? Sign Up

Landlord Tax Planning Book Now