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

Gromit

16:59 PM, 5th August 2022, About A week ago

Reply to the comment left by Joanna Fear at 05/08/2022 - 15:30
A lot of hand wringing!

GP View Profile

14:56 PM, 9th August 2022, About 4 days ago

Its bad enough with a hiatus at change over times particularly with the mountain of forms, certificates required to be sent plus the check in and check out.
Seems like trying to
back up universitys accommodation
and big purpose built blocks.
Create mayhem
Reasons big money . . . .
Trying to reduce buy to lets because . . .

BUT forget as often the letting agents do that student market homes with larger numbers don't easily manage the paperwork or the reletting or cleaning, the heavy repairs and the advance certainty needed for students.

But ignore
1. lack of housing
2. ever more legally threatening legislation and penalties for non compliance putting off landlords
3. Hedge funds are leaving penthouse and other flats empty because they lie saying that they are liquid current assets and therefore current assets like cash. Hiding that they are a property company in disguise without liquid funding and distorting with the accountants the means purpose and true and fair view of accounts.

Those landlords with only 2 houses are unfairly penalised with the same burden of law and procedures but only the experience of 2 lets. No10 should get a grip on this and stop favouring the monopolists and oligopolists - who use other peoples money and ignore complaints

Gromit

16:21 PM, 9th August 2022, About 4 days ago

Reply to the comment left by GP at 09/08/2022 - 14:56
They are favoured because they are big Tory donors (and provide nice "jollys" for those with influence).

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