Uncover the Renters’ Reform Bill’s: Impact on Student Accommodation. 2023 has the potential to be a pivotal year for the private rental sector, as Michael Gove aims to rebalance the relationship between landlords and tenants. The Renters’ Reform Bill, which has been in discussion since 2019. It has garnered extensive attention from various influential groups such as the NRLA, the Law Society, Shelter, Generation Rent, and others. With differing levels of enthusiasm and recommendations, the sector as a whole anxiously awaits the government’s commitment to implementing the Bill within this parliamentary session, potentially as early as mid-May.
The Renters’ Reform Bill has generated considerable attention due to its focus on prohibiting Section 21 evictions, also known as ‘no fault’ evictions, which often result in homelessness when misused by landlords as a response to reasonable tenant requests for repairs or improvements. However, it is important to acknowledge that Section 21 also has legitimate applications that benefit both tenants and property managers. In particular, within the student accommodation sector.
Fixed-term tenancies play a crucial role in the student private rental sector (PRS) as they align with the academic year, ensuring that tenancies start and end at appropriate times. This predictability benefits property managers and students alike by maintaining a balanced supply and demand for student accommodation.
Purpose-Built Student Accommodation (PBSA)
Concerns have been raised that unlike Purpose-Built Student Accommodation (PBSA), student Houses in Multiple Occupation (HMOs) are unlikely to receive exemptions or concessions to protect fixed-term tenancies. This could result in significant disruption for HMO property managers. A House of Commons Committee report published in February 2023 cautioned that this situation might force many smaller landlords to exit the market entirely, leading to a reduction in the availability of student accommodation.
However, it is unlikely that there would be a decrease in the supply of student accommodation, considering the increasing interest from institutional buyers who are keen to expand their portfolios of student Houses in Multiple Occupation (HMOs) despite the widespread implementation of Article 4 directives. After substantial investments in Purpose-Built Student Accommodation (PBSA) over the past decade, which in some cases led to an oversupply of luxury accommodation in certain areas, pension funds and asset managers are now turning their focus towards student HMOs. This move allows them to diversify their tenant base and broaden their exposure to the domestic student market.
Discrepancies in the regulations governing PBSA and HMOs
A more significant concern revolves around the potential impact on students’ choices if there are discrepancies in the regulations governing PBSA and HMOs. Transitioning from PBSA to HMO accommodation from one year to the next could become more challenging for PBSA tenants, as they would still be bound by a predetermined end date for their tenancy.Â
Students seeking to move from one HMO to another could face similar constraints on their choices. Currently, all properties in a city are typically released around the same time, prioritizing student choice and rewarding high-quality houses with numerous interested tenants. However, if properties are sporadically released to the market, students may be compelled to settle for lower-quality housing due to limited options.
The Renters’ Reform Bill is anticipated to introduce a requirement for tenants to provide a two-month notice period to terminate their tenancy. This provision grants tenants the freedom to exercise this option as they see fit. Consequently, it can be assumed that student tenants, unless incentivized otherwise, would likely give notice just before their intended departure.
Currently, property managers benefit from fixed-term tenancies that allow them to know well in advance, often up to a year ahead, when a student property will become available. This enables them to align their marketing efforts with peak demand. However, if this dynamic changes, property managers would need to delay marketing the property, potentially leading to a significantly extended house-hunting season. While this represents a major departure from the current situation, it could prove advantageous for property managers as a more evenly spread house-hunting season is easier to manage and less chaotic for all parties involved.
Private Tenancies (Scotland) Act
Interestingly, a similar scenario has already unfolded with the implementation of the Private Tenancies (Scotland) Act, which introduced extensive changes to tenancy laws in Scotland. Post-COVID trends indicate a growing trend of institutionalization of student HMO properties. However, it should be noted that the exodus of private landlords is not solely attributable to the ban on fixed-term tenancies but also to the increasing level of local and city regulations.
Property managers in Scotland have acknowledged making operational adjustments to adapt to the evolving landscape, resulting from the ban on fixed-term tenancies in the student private rental sector. However, given the various regulatory, economic, and societal disruptions experienced by the market since 2020. It is extremely challenging to isolate the specific impact of this regulatory change on the Scottish student private rental sector with certainty.
At first glance, it seems unlikely that the Renters’ Reform Bill will cause significant disruption to student property managers, although it may contribute to the growing trend of institutional management within the Houses in Multiple Occupation (HMO) sector. If the government follows Scotland’s lead and does not provide exemptions for fixed-term tenancies in student HMOs.
In certain cases, differences in tenancy regulations between HMOs and Purpose-Built Student Accommodation (PBSA) could limit student choices. However, the natural rhythm of the academic year would offset this impact as students align their house moves with summer break. The attention is now on Mr. Gove to see if any of these potential changes materialize in the near future.
* Tom Walker is a co-founder of StuRents, the biggest UK student accommodation platform *
