Date Originally Published: 13th September 2024
Updated: 21st October 2024
Briefing on the Second Reading of the Bill - The Consequences for Student Housing
- The Role of the Private Rented Sector in Supporting Higher Education
Student housing is an educational issue. Housing enables students to study at a university of their choice, and has supported the expansion of HE over recent decades. Students only live near their university for a short time, and treating students the same as the rest of the private rented sector ignores their special requirements such as:
- Housing available in line with the academic year
- Affordability, often meaning shared housing
- Rental payments tied to student loan instalments
- A preference for shared, sociable living often on joint tenancies
The Renters’ Rights Bill proposes significant changes to the private rented sector, which will strengthen tenant rights and recourse. This will have significant impacts on the off-street sector (shared houses and flats) for students, and some unintended consequences including reducing availability and increasing rents.
This briefing focuses specifically on off-street shared student housing in the private rented sector (traditional shared student houses). Unipol is also involved in the halls / purpose built student accommodation sector, which will have different treatment under the Bill, and will produce a separate note on that in due course.
- How many students rent? And what kind of housing do they live in?
There are 2,432,010 students studying in England, and 52% live in some form of rented housing:
- First years mainly live in University or private sector halls (533,380)
- Second and third-year undergraduates mainly live in off-street houses (731,790)
Off-street rented housing provides an available and affordable source of housing for 30% (731,790) of students. Rents are lower and more affordable on limited student budgets, reducing the overall cost of study, averaging £130 per week compared to £190 per week in halls.
The Bill proposes significant changes to the off-street sector of the market.
- Our Concerns
The Bill proposes an end to section 21 no fault evictions, and this will benefit longer-term renters in the general private rented sector. It will also benefit the first cohort of students it applies to, who will be able to give notice before their 12-month contract ends, with many expected to reduce to 9 months.
Landlords who experience this increased risk and financial precarity are likely either significantly increase future rents or move to another sector of the rental market.
We are therefore concerned that future cohorts of student will face higher rents and less available off-street housing, leading to problems of student homelessness, damaging access to Higher Education for those with the least resources.
Similar rental reforms were introduced by the Scottish Government in 2017, and there is now an acute shortage of student housing and the Government recently reported[1] on the problems and called for wide ranging action to address the issue.
There are some specific elements of the Bill that could also cause harm to students:
- The Bill provides for rent to paid monthly. Most students rely on the maintenance loan to pay their rent, which is paid in three instalments, and landlords time their rental periods to coincide with this. A move to monthly rent periods will increase financial hardship to students, who find termly rental payments a helpful way to manage their budgets.
- The new student ground for possession 4A will only apply to Houses of Multiple Occupation (so with 3 or more occupants) excluding one- or two-bedroom properties. These smaller properties make an estimated 31% of the market across the UK, over 50% in some locations such as Newcastle upon Tyne and Preston[2]. A loss of 30% of the off-street market could equate to 226,000 students not being able to find suitable housing.
- Recommendations
- Government should publish an impact assessment of the educational impacts of the proposed Bill. This should include comparison with the situation in Scotland.
- There is no single department with responsibility for student housing, meaning it often gets overlooked. The Department for Education should lead on this issue, with co-operation from MHCLG.
- A Student Housing Working group should be established by Government to consider the detail of the Bill, and its implementation and ongoing impacts
- A Student Tenancy specifically for the off-street rented sector should be considered. Features could include:
- A cooling off period after booking that would enable students to cancel up to 4 months before the tenancy began, which would effectively end early renting
- A ban on requiring rental guarantors, which negatively impact care leavers and estranged students, as well as international students
- The ability to give notice in specified circumstances such not getting the required grades or visa to commence study, or leaving university
- Rental payment periods linked to student loan payments
- In exchange for these bespoke rights that address student concerns, landlords should retain the ability to issue fixed term tenancy agreements, enabling the ongoing supply of housing linked to the academic cycle.
Unipol has a number of detailed questions and concerns about the Bill. We will provide further notes on this in due course, as well as our own statistical impact assessment of the Bill on the supply of student housing and views from students about the impact of the Bill.
[1] https://www.cih.org/publications/student-housing-options-and-experiences-of-homelessness-in-scotland/
[2] Data from www.accommodationforstudents.com
Renters' Rights Webinar Recording
Unipol hosted a webinar regarding the upcoming legislation, featuring the following speakers:
- Hilary Crook - Director, Hatch Legal
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Jaskaran Deu - Director, Deu Estates
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Martin Blakey - Independent Student Housing Expert
-
Pierrick Roger - York Student Union Officer 2023-24
The recording of the webinar can be found here
Renters Rights Bill - Overview
On 11th September the Government published its new Renter’s Rights Bill, which replaces the previous Renters’ (Reform) Bill. The new Bill, which will introduce radical reform of the private rented sector, will have wide-ranging impacts on the student housing sector.
Many of the features from the previous Bill have been retained, with a few notable omissions, but the new Bill includes a number of new additions.
What are the new features with most relevance to Student Housing?
Section 21 to be abolished
As featured in the previous Bill, Section 21 and fixed term tenancies will come to an end, expected from summer 2025. This will apply primarily to the off-street housing sector, and will mean a significant change in how tenancies operate.
All tenants will be on open ended tenancies with the ability to give two months’ notice from the commencement of the tenancy, so in effect the minimum term for a new tenancy will be two months. The amendment to the previous Bill requiring a minimum term of 4 months, plus two months’ notice, has been dropped.
The Explanatory Note to the Bill [Renters’ Rights (parliament.uk)] details that providers of PBSA who are part of a Government approved Code such as the ANUK/Unipol National Code, will be exempt from these provisions as these tenancies will instead be dealt with under the Protection from Eviction Act 1977.
Grounds for Possession for Students
The Bill introduces a new mandatory ground which will allow landlords renting off-street houses to full-time students to seek possession ahead of each new academic year (between June to September) as long as notice is served before the tenancy is entered into. It will apply to full-time students who occupy on either joint or individual tenancy agreements.
Redress
It will be a requirement for all residential landlords to be a member of an authorised redress scheme, and it is expected there will be single a Ombudsman rather than multiple schemes.
Landlord Database
It will be a requirement for all residential landlords and dwellings to be registered on a landlord database before they advertise or let any property, although the Government has made provision to potentially alter this requirement for niche arrangements like PBSA.
Rental Bidding
The Bill prohibits ‘rental bidding’, the inviting, encouraging or accepting of a higher rent when letting a property. Landlords and letting agents will be required to publish an asking rent for their property. They will then be prohibited from inviting, encouraging or accepting offers of rent above this price.
Decent Homes Standard
This will apply to the private rented sector, setting certain new requirements in relation to state of repair and what must be provided. Secondary legislation will be required to provide further detail.
Awaab’s Law
The new legislation which is currently being introduced in the social housing sector obligates landlords to take action within certain timescales when hazardous repairs are reported to them, and it will be extended to the private rented sector.
Investigatory Powers for Local Authorities
Local Authorities will be given new investigatory powers to enforce these and existing standards already in place, including rights to demand evidence, enter premises and levy additional fines.
Penalties
The penalties for breaching the new provisions can include fines by the Local Authority and rent repayment orders
Initial Thoughts on the Impact on Student Housing
This is a complex Bill with much of the detail still to follow in secondary legislation, however it is substantially unchanged from the previous Bill so it is possible to make some initial comments.
Many of the reforms in this Bill will strengthen rights for tenants, and this is welcomed in the context of the wider private rented sector. However elements of it are concerning for the student market.
The Off-Street Market
The Government have recognised that the student housing market works on the basis of an academic cycle, and has granted rights to landlords that will enable them to end tenancies in line with this. This was previously added as an amendment to the previous Bill, so its welcomed that this has been retained in the new Bill
However, all tenants will now be able to give 2 months’ notice to terminate their tenancy as soon as it commences. The amendment to the previous Bill, that created a de-facto minimum term of 6 months, has been shed. This means students will be able to give notice as early as they wish, perhaps in early May when exams are over, leaving the landlord with a void they are unlikely to fill until September. In joint tenancies, a single tenant giving notice could bring a whole tenancy to an end, creating disruption for their housemates who may need to find alternative housing.
Landlords faced with the prospect of 3 – 4 month void period in every 12 months, may look at their business and conclude the student market is no longer viable and move to other tenant groups. Alternatively, they may substantially increase rents to cover void periods. Unipol’s concern here is not for the ongoing profitability of student rentals, but based on the fact that 731,000 students (latest HESA figures available for 2022 – 2023 year) students live in private rented houses and flats whilst studying, if this supply falters, there is simply no ready replacement for it.
Even a small decline of the order of 10% after implementation in 2025 could see 70,000 students with no viable alternative accommodation and facing homelessness in year 2 or 3 of their degree.
The alternative to the off-street market is PBSA. This is more expensive, and for many will not be an affordable option. A wider issue is that there is not enough supply to cover any shortfall that may develop if the off-street market declines. This new academic year has seen an additional 8,500 PBSA beds open their doors in the UK, whilst the undergraduate intake increased by 5,200. Since the pandemic, the PBSA pipeline has slowed considerably, and is unlikely to be able to cater for any significant increase in demand. The student housing shortages seen in cities including Bristol and Manchester in recent years may well become the norm across the country.
An alternative to the PBSA or off-street market is staying at home and commuting to University. This is fine for students who live close to an institution that offers their chosen course and has appropriate support servies, but potentially bad luck for those with no option to travel away from home.
What about Purpose Built Student Accommodation?
In respect of PBSA, the exemption for members of an approved Code is welcomed and recognises that these properties are designed just for students and that the prospect of graduates having the option of an indefinite tenancy is not tenable.
Detailed work will be needed to ensure the exemption from tenure reform for members of an approved Code will be workable for students and providers, and Unipol will work with the Government on this point. Issues such as changes in membership and transitional arrangements will need to be resolved.
And the Rest of the Bill?
More detail will follow on the other provisions in the Bill in due course.
What Next?
Unipol has concerns that this Bill will reduce to supply of available and affordable housing for students, thereby reducing student choice and access to Higher Education, and is these making representations to the Government. We have written a letter to the Government today to express our concerns.
Further updates on the progress of the Bill and our representations to Government will published via the News section of the Unipol and National Codes websites.