Student rents to sky-rocket as the Government hands the student rental market to institutions

by Dr Rosalind Beck

11:20 AM, 1st November 2016
About 2 years ago

Student rents to sky-rocket as the Government hands the student rental market to institutions

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Student rents to sky-rocket as the Government hands the student rental market to institutions

At Property118, we have been saying for some time that the Government’s discriminatory fiscal attack on unincorporated landlords with finance costs (embodied in Section 24 of the Finance (No. 2) Act 2015) is an outrage and will lead to massive rent rises, including for students.student costs

As we know, at the same time that the Government is imposing potentially infinite tax rates on ‘individual’ landlords, they are feting and exempting institutional providers of housing, many of whom ‘specialise’ in the student market.

As part of this the Government is promoting the ‘Build to Rent’ programme, whereby institutions, many of whom donate to the Conservative Party build homes to rent out at hugely inflated prices, often more than triple what ‘individual’ landlords charge. They then boast to potential share-holders about the huge yields they can achieve.  This is of course a scandalous conflict of interest on the part of Government policy-makers and a dreadful development for the young people of this country.

British students are now realising the full implications of this and they are speaking out. This week  a group of student representatives wrote the following, with regard to an award programme for the best providers of student housing:

 

“Dear Property Week,

We appreciate the opportunity given to us, as students, to judge the Student Experience category for the upcoming Student Accommodation Awards. However, we regret to inform you that the panel could not come to a decision to award any of the entrants.

Unfortunately, none of the entrants could demonstrate that they are meeting the urgent need of students to live in accommodation that will not force them into poverty.

Most entrants price their cheapest rooms above the national average of £146 per week, and certainly above a level which student maintenance loans will reasonably cover. Many charge rents of more than £300 per week.

One entrant is reported for having put disabled students at great risk of danger. Another charges hundreds of pounds to act as guarantor, profiting from the discrimination of migrants and the inability of poor estranged students to provide a guarantor.

Another, in their application, puts shareholder satisfaction before student satisfaction and boasts of “20m revenues”.

Students are not seeking luxury getaways or cinemas in our living rooms. We are not ‘satisfied’ knowing our student debt is lining the pockets of millionaire shareholders.

High rents are driving the social cleansing of education. Working class students are being priced out: unable to access higher education altogether, or forced to work long hours, disadvantaging the poorest.

We urge all providers to invest in affordable accommodation so that the future of higher education is open to all, regardless of parental income. We urge all universities to cease the privatisation of accommodation, and to provide a guarantor service, We urge the sector to lower profits, reduce rents and support the call for greater financial support for students in the form of universal living grants.

Unless all students have access to safe, affordable accommodation at every institution and the means to pay for it, there is no cause for celebration, nor the ability for us to award a for-profit sector failing so many of our peers.

Yours Sincerely

Student Accommodation Awards Student Judges 2016”

 

As a licensed landlord with student housing in Cardiff, my rents average around £265 a month excluding bills and around £330 a month including bills in traditional house-shares, some of which have lovely original features and are often spacious and characterful. I am flabbergasted at how these institutions now think they can charge these huge rents for their allegedly ‘luxurious’ provision. As the students say, they can’t afford this luxury. They would prefer ‘cheap and cheerful,’ and to not be saddled with enormous debts.

This is a truly awful development (misrepresented as an ‘improvement’) and will have extreme repercussions for the young people of this country. The problem is that the institutions may gain a monopoly as many portfolio landlords who provide the far more affordable traditional lets will be driven out of business because of having to pay huge amounts of tax on their main cost, while the institutions continue to deduct finance costs as an allowable expense (which is normal business practice).

To make matters worse, the students might not have taken into account the fact that there is also likely to be a knock-on effect, whereby the institutions also gain dominance in the ‘young, professional let’ market, so they will have to shell out huge amounts of their salaries for years to come, thwarting any ambition to save a deposit to buy their own home and condemning them to all of the worry experienced by people facing a life in debt. George Osborne stated that this fiscal attack on landlords would help first time buyers. We can all see how that was a lie.

This Government-sponsored programme of handing institutions a monopoly in the market must be halted immediately – and Section 24 reversed – otherwise, the financial futures of the young people of this country look grim indeed.

It must be added that, perhaps surprisingly, the interests of ‘individual’ landlords and students are now closely aligned and it is incumbent on both groups to unite to fight this attempt to obliterate the affordable ‘traditional’ lets in our University cities. The first step in this is to immediately:

 

Scrap the buy-to-let tax!

 

Dr Rosalind Beck



Comments

Trendo

12:09 PM, 1st November 2016
About 2 years ago

£265 is very low. The average student rent in Cardiff is more like £300 exc bills.
This year will see that rise to more like £325 i would think.

CazT

13:23 PM, 1st November 2016
About 2 years ago

Excellent explanation as usual from Ros, she has a knack of putting complex topics into plain understandable English. I have shared this on Facebook, even though it doesn't affect me personally, I think it's hugely important to students and their families.

dom glynn

14:12 PM, 1st November 2016
About 2 years ago

Great post Ros.
I'm also a student landlord, but in Southampton.
Every bit of available land seems to be being used to build large blocks of student pods.
My room rents are around 40% of the cost of a 'pod'.
I've talked to some of my tenants about this, and they all agree that both financially and socially, they'd rather live in a shared house.
Well done to the students on the judging panel - clearly they are not blinded by bling!
I assume you've seen the threads about Liverpool and Brighton lobbying for us to be charged business rates?
If that happens, I'm going to have to throw the towel in.

Grumpy Doug

14:33 PM, 1st November 2016
About 2 years ago

Hear hear. Ditto - I'm a student landlord in Bournemouth and my rents, even with bills added, are about £200 per month - YES £200 PER MONTH - cheaper than the rabbit hutches that they cram the first year students into. Checked in a load of 2nd year students in at the start of September and all they could talk about was how much cheaper it was ... and my rents 5% up on last year. Great feedback from the student panel - says it all.

Grumpy Doug

18:08 PM, 1st November 2016
About 2 years ago

Part II - I'm lousy with Facebook / Twitter etc - anyone fancy reaching out to this group to engage with them on the common cause? They seem to have ruffled a few feathers looking at all the outlets that have published this article. On the face of it they're unlikely allies, but what an intriguing combination.

STUDENTS AND LANDLORDS UNITE TO DEFEAT TENANT TAX ??

terry sullivan

11:20 AM, 2nd November 2016
About 2 years ago

i am told that portsmouth uni dictates rent levels to private landlords--is this true--what are others charging per room in portsmouth for student lets--how many months per year?

Grumpy Doug

11:42 AM, 2nd November 2016
About 2 years ago

Reply to the comment left by "terry sullivan" at "02/11/2016 - 11:20":

Hello Terry. It may well be that they have a Student Accommodation team that are effectively agents for private landlords (we have something similar here in Bournemouth, UniLet). In that case they would have a strong influence over rents in those houses that they act as agents for. Quite a few "remote" landlords here use UniLet as it's the easy option for them. Fortunately the rest of us are free agents so unencumbered .... however as per my previous posts, I'm lower cost anyway so it's a win-win for my tenants (at the moment anyway!)

Dr Rosalind Beck

9:05 AM, 5th November 2016
About 2 years ago

Reply to the comment left by "Trendo " at "01/11/2016 - 12:09":

Hi Trendo. Yes, £265 is low. My student rents were around £250 to £260 for about a decade - I was happy to keep them low as interest rates were low and one doesn't like to be 'greedy' - but because of Section 24 I have increased some to £280. Next year they will go up again. Local letting agents tell me that they can achieve higher rents that those I am charging. They will be going to the maximum I can get as I have to make a profit in my business as it supports my family and I have no other income. I also consider my properties to be my pension.

Because of the nature of s24 and how effective tax rates could go infinite for me if interest rates rose by about 3% I need to build a war-chest to pay tax when I have no profit. I will not be selling any time soon as I calculate I can manage for quite some time this way. I have always ran my business bearing in mind how I would manage if interest rates rose to 7% for example and kept aside money for this eventuality. Many of the cliches used about landlords - we are a risk to the economy, we're greedy and so on - are pure myth. We have been successful for so long because we are careful and because we look after customers.

It is however, unfortunately the case that students will probably bear the brunt of the increases as it is easier to get more money from HMOs (adding the odd £10 and £20 per month to each of 4 students or young professionals for example) than it is to get it from valleys houses where people are low-paid and there might be one wage-earner paying the rent and all the bills.

Trendo

0:47 AM, 7th November 2016
About 2 years ago

Reply to the comment left by "Dr Rosalind Beck" at "05/11/2016 - 09:05":

Student rent tends to be lower than prof rent in HMOs , with higher demand from prof , student rents are increasing.
Also 50% rents for Jul and Aug are being replaced with 75% and 100% rents for these months.
Market rates for students in Cardiff are now £300pcm per room + for reasonable quality HMOs , recently modernised are £350 + . Dont take my word for it, check rightmove or call agents to verify. You may want to have a discussion with your agents about this or consider refurbing or upgrading your props to max them out.

http://www.newsnow.co.uk/classifieds/flatshare-rooms-for-rent/student-room-cardiff.html

Trendo

1:03 AM, 7th November 2016
About 2 years ago

Reply to the comment left by "Dr Rosalind Beck" at "05/11/2016 - 09:05":

I would be using that "war chest" to upgrade you student property if i were you !

if you may it more desireable you will get 12 x 350 x 4 = £16800 which is a serious improvement on 11 x 265 x4 = 11660

£5140 is a 44% improvement !

11mths x £280 x 4rms = £12320

£660 is a 5.66% improvement

NOTE: that is not a "rent hike" that is just bringing rent in line with market rates. If your agent is price setting then either your property is well below par (which you can do something about!) or they are just making it a cheap easy let for themselves (which you can alo do something about !)

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