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Students in UK private rented property are set to face rent rises as a result of legislative reforms, in spite of government concessions to buy-to-let investors in the sector, housing and landlord groups warned.
The government announced changes to its renters reform bill last week, in response to a report by a committee of MPs. Among these was a pledge to allow landlords of student properties the legal means to take possession of their property at the end of the year.
The move assuaged concerns among these landlords that the proposed abolition of “no-fault evictions” — known as Section 21 — would threaten their business model by giving student tenants the right to remain in a property beyond the end of the academic year. The change will give landlords a “ground for possession” to evict, with more details on how this will work expected as the bill progresses through Parliament.
However, the concessions did not restore to landlords of student homes the ability to set fixed-term contracts, and they gave tenants the right to end a tenancy with only two months’ notice. The government said student tenants should have the flexibility offered to all tenants. Bringing in a new code to cover student housing was not “viable”, it added.
“We believe retaining fixed terms would unfairly lock students into contracts, meaning they could not leave if a property is poor quality, or their circumstances change,” it said.
As a result, though, landlords fear they may see a rise in the number of voids, as student tenants would be free to walk away from a property but replacements would be hard to find as most would already have arranged accommodation for the university year.
Chris Norris, policy adviser at the National Residential Landlords Association, which represents buy-to-let investors, said: “In the rest of the market it’s not a huge issue because there’s a lot of demand. In the student market, it’s much more difficult [to fill voids] because students would arrange the tenancy very early on. And once they’re in that tenancy, they’ll stay there throughout that academic year.”
In order to offset the financial risks of empty rooms or flats, landlords may choose to raise rents overall. Norris said: “A landlord might think — if I have one default in every five tenancies, I have to factor in only receiving, say, nine months’ rent. That might mean a five or 10 per cent increase in the rents they charge.”
Students are already under pressure on rents, which have risen by 14.6 per cent over the past two academic years, according to research this week by student housing charity Unipol and the Higher Education Policy Institute (Hepi), a think-tank. The annual cost of accommodation eats up nearly all of the average maintenance loan, the research found, leaving students with just £24 over the year for other essentials.
Bristol, Exeter and Glasgow had the highest level of rents among university locations, with rents in Glasgow climbing by 20.4 per cent over the past two years.
With maintenance grants set to rise this academic year by 2.8 per cent, Nick Hillman, director of Hepi, said: “We are now at a crisis point. Across most of the UK, the official levels of maintenance support simply do not cover anything like most students’ actual living costs. In the short term, maintenance support should be increased at least in line with inflation.”
Both Unipol and Hepi said the renters reform bill would push more landlords to exit the student private-rented sector “causing it to shrink further and ultimately putting university-owned and purpose-built accommodation under more strain, exacerbating supply issues even further”.
Martin Blakey, chief executive of Unipol, said: “Although the government have listened, they have done so with only one ear and the outcome is still likely to be reflected in less supply and higher rents.”
The proposed changes also mean the rights of landlords in the private rented sector differ from those providing purpose-built student accommodation, typically large blocks of student rooms with institutional owners, who may continue to rely on fixed-term contracts with no notice period for tenants.
Aneisha Beveridge, research director at estate agent Hamptons, said that while students would often have a very similar experience in purpose-built accommodation and student houses, the rules governing landlords of either type were increasingly diverging.
“There are risks of creating yet another two-tier market, similar to landlords who hold homes in companies and those who hold them in their personal names,” she said.
