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 3 weeks ago 33

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

Alistair Cooper

23:24 PM, 27th July 2022, About 2 weeks ago

I agree mainly with Bristol Landlord that the true aim of the current government (if they have any cheer aim at all) is the big business takeover of the PRS. However he/she is incorrect that we have a government that a majority of the British people voted for. Due to our archaic 1st past the post system almost every Tory govt this decade has been ejected by a minority of voters. Add to this lower and lower turnout at ejections and you end up with a govt holding an 80 seat majority although it gained a minority of votes cast by those that could be bothered or motivated to vote!
Our democracy has a great history but is becoming ever fragile.
However all 3 main parties are obsessed with what they perceive as the great political prize of attracting votes from generation rent so will support I’ll thought through policy that in many cases will actually damage renters position just because it ‘appears’ to attract those voters support
Brexit was not the only pup sold to the British people

Di Driscoll

14:59 PM, 28th July 2022, About 2 weeks ago

I agree that I think it is a government plan that student housing will be purpose built run by corporations - with very little concern for their tenants welfare. I wonder if the proposed terms on tenant being able to leave at more or less any time will apply to these.
We have let to students a few years ago and their rent was about £1000 per person less than in halls. The house was always in a mess. We have a (different) mid terraced house let to professionals with social housing opposite and with 2 student lets on each side. The student behaviour - late night drunken street parties and loud music - is not compatible with the residential community so I am hoping that the current landlords stop letting to students. But their rent is much higher than we charge so I doubt it.

Gromit

8:24 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by Bristol Landlord at 27/07/2022 - 07:47
..why else would PBSA's be exempted?

Gromit

8:28 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by Joanna Fear at 27/07/2022 - 12:06
...but it'll be different now. If second year students can't find a property for their final/3rd year (because there'll be a shortage) there's nothing to stop them just staying on.

Yvonne Francis

9:35 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by Gromit at 30/07/2022 - 08:28
But they all would have to stay on and in the case of mine it may mean all eight. Possible but unlikly.

Gromit

10:16 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by Yvonne Francis at 30/07/2022 - 09:35
If they are second years going into third/final year and as a group they cannot find somewhere.........,...

Yvonne Francis

10:39 AM, 30th July 2022, About 2 weeks ago

Reply to the comment left by Gromit at 30/07/2022 - 10:16
Hi Gromit, What exactly are you saying in your last post? I did read that before or have I missed something? In my University town students are always offered university accommodation in their 1st and 3rd years so they always have somewhere to go.

Gromit

12:14 PM, 30th July 2022, About 2 weeks ago

Reply to the comment left by Yvonne Francis at 30/07/2022 - 10:39
Mine is first year only.

Robert M

0:34 AM, 31st July 2022, About 2 weeks ago

I agree with the comments about students not wanting to stay. It's easy, with a joint tenancy and each student supported by a guarantor they will move out - especially if you add a clause about the rent increasing by 50% on the intended end date.

It's a bit like the campaign to end bias or prejudice against benefit claimants. Just have a simple policy that you will rent to anyone - provided thay are suppored by a UK resident credit checked guarantor. Problem almost solved.

Sue Steel

11:35 AM, 31st July 2022, About 2 weeks ago

There is an added benefit to the government in forcing all students into PBSA. It will instantly cure the problem of unruly student houses in residential areas AND make lots of housing available for owner occupiers, both of which will make them very popular with the electorate.

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