The Renters (Reform) Bill has finally been published by the Government (on Wednesday, 17May 2023 – you can read the full text of the Bill here, and the Government’s press release here).
Currently, student renting works differently to the rest of the private rented sector (PRS). Students who live away from home may live in halls of residence, purpose-built student accommodation, or off-street student rental properties. An off-street rental property usually describes (in this case) a residential property that is being used to house students. Students who live in halls or PBSA sign a fixed term tenancy agreement, for up to 12 months.
Most students living in private rented accommodation sign-up to a fixed term tenancy agreement (FTTA) with their housemates for 12 months, often from July to July. This sign-up process happens anywhere from autumn to spring, depending on the university town. However, the process is starting earlier each year due to increasing student concern over the lack of affordable, quality or even available housing stock. The disadvantage of this system is that students are locked-in to a 12-month tenancy, often that they have signed months before the moved in, with no way to be released from this tenancy. They are also expected to move out at the end of the 12 months, unless they can sign up for the next, full, 12-month tenancy.
The advantages of FTTAs for students are:
- They know where they will live for the next academic year, often well in advance.
- They have a secure tenancy for 12 months, knowing that the tenancy is very unlikely to be ended ahead of this date.
The disadvantages of FTTAs for students are:
- They cannot end the tenancy until the end of the fixed term. If there is a friendship breakdown, the student withdraws from their studies or they find somewhere alternative to live, a student can leave the property, but they are liable for the rent until the end of the term. (In reality, some landlords will be flexible about moving in another tenant, but this so not guaranteed.)
- They have to move out at the end of their 12-month tenancy agreement.
In the more general private rented sector, professionals or families sign periodic (open-ended) tenancies. They have a tenancy agreement with their landlord with an agreed term of notice, often a month or two. If the tenant wants to leave, they hand in their notice and are no longer liable for the rent at the end of the notice period. Under the current system, the tenancy continues unless a tenant hands in their notice, or the landlord evicts the tenant.
The Bill proposes to make several changes to the current system. This includes:
- Applying the Decent Homes Standard to the private rented sector (PRS) with the aim of halving the number of poor-quality rental properties.
- Strengthening landlords’ power to evict tenants for anti-social behaviour or failure to pay rent.
- Creating a new ombudsman to provide quicker and cheaper resolutions to disputes.
- Creating a digital portal so landlords can more easily understand their duties, and tenants can be better informed about the property they wish to rent.
- Making it illegal for landlords to have a blanket ban on renting to tenants with children or pets, or tenants on benefits.
- Ending ‘Section 21’ no-fault evictions.
- Banning fixed-term tenancy agreements (FTTAs) therefore making bringing student letting on parr with the rest of the private rented sector.
- Only allowing rent increases once a year.
Efforts to improve the standards of poor-quality housing are welcome. Students will find the portal system useful, and the ombudsman will hopefully give rise to faster repairs. Given the scale of this issue, and the short-term nature of many student tenancies, the ombudsman will have to be well resourced and fast-acting to be useful to students.
Where the Renters (Reform) Bill will have an impact on students is the proposal to ban FTTAs. The Bill proposes to remove FTTAs, putting all houses, including student houses, onto periodic (open-ended) contracts. Students would be able to remain in their student house indefinitely, until they give their two-months’ notice to leave the property. This does provide a greater flexibility for students, who can stay in a property until, or beyond, the completion of their degree. However, removing FTTAs for students will lead to a decrease in housing stability.
This will happen for the following reasons:
- All tenancies will be open-ended, with a two-month notice period. Students are likely to start handing in their notice in April and May. Therefore, students seeking accommodation will be finishing one year of study without knowing where they will live the next year. This will also mean that students may be viewing houses during their summer exam periods.
- Students may feel under increased pressure to secure accommodation, leading to a reduction in standards, rather than an improvement, as students feel pressured into taking any property as it becomes available.
- Periodic tenancies for students are also likely to be joint tenancies. Therefore, if one tenant gives notice to quit, the tenancy ends for all tenants at the end of the notice period (a minimum of two months). In a house of five students, two may want to return to their parents’ homes for the summer as soon as their exam period is over, particularly as this may save them three months of rent. One student may want to stay in their student house to work over the summer, one to complete resits, and one student who is care experienced or estranged may have no familial home to return to. In this scenario, the three students who needed to remain in the house could end up with nowhere to live for the summer. This is a particular risk for care experienced, estranged and international students who cannot return home for the summer. A more extreme example is a student withdrawing from university during the middle of the academic year. If they give NTQ in November, the tenancy ends for all tenants in January. The landlord now has a choice. They can attempt to find more students to take on the tenancy. However, landlords will be wary of taking on student tenants part-way through their final, masters or international year of study, knowing that these students will only be renting for a few months before possibly moving on for work, or moving back home. The landlord would then have to move in another group of students in September. Advertising, a property, reference and credit-checking students, obtaining guarantors and taking deposits to put into deposit protection schemes is time-consuming and costly for landlords. Each time a landlord does this, it eats into their profits. Instead, the landlord could rent the property to professionals, or a family, who are likely to stay in the property on a longer-term basis. This removes the house from the student rental market cycle. Where this happens repeatedly, the student housing market becomes smaller, and competition for student housing increases.
- Student landlords rely on the knowledge that their properties will be filled for 12 months at a time. Creating a situation where landlords will have renting voids over the summer may lead them to move into professional or Airbnb letting. A Levelling Up, Housing and Communities Committee’s report stated:
We conclude that the abolition of fixed-term tenancies, combined with the repeal of section 21, would undoubtedly give tenants greater security of tenure, and we therefore welcome the proposals. The one exception is the general student PRS market. Currently, the proposal is to include this part of the PRS in the tenancy reforms, but we conclude that abolishing fixed-term contracts here could make letting to students considerably less attractive to private landlords, as the student market mirrors the academic year and benefits greatly from 12-month fixed tenancies. We agree with the evidence that not exempting the student PRS could push up rents or reduce the availability of student rental properties, at a time when the market in many university towns and cities is already very tight. We therefore recommend that the Government retain fixed-term contracts in the student PRS.
The current housing crisis has been caused by market failure. There are not enough rental properties available to create a level of competition that increases standards and maintains competitive rental rates. The Renters (Reform) Bill, as the Levelling Up, Housing and Communities Committee’s said, will exacerbate this problem for students, rather than help to solve it. There are several university towns and cities who cannot afford an exodus of private landlords from the student sector to professional lets, or to the unregulated Airbnb market.
Landlords may also be concerned about a renting void over the summer months. This may lead to an increase in monthly rental rates.
The Scottish Government recently commissioned the UK Collaborative Centre for Housing Evidence to review recent similar reforms to student accommodation in Scotland. The report states:
When the new private tenancy arrangements for Scotland were legislated for in 2016, this reflected a decade of regulatory change in Scotland culminating in open-ended tenancies, finite and reduced means of repossession by landlords and a 28-day cooling off period for tenants at the start of tenancies.It is now widely accepted across the sector that as a result of the new tenancy and the experience of Covid-19, private landlords who hitherto had been content to let to students are now moving away from that market and looking for more long-term tenants with less chance of void periods. The evidence from Glasgow and Edinburgh appears to suggest that this is shrinking the available supply for student HMOs and putting upward pressure on rents.
This shift has happened quickly in Scotland, in less than one normal tenancy cycle. The University of Glasgow citied this market contraction when it withdrew its guarantee of accommodation. NUS Scotland note that the student housing shortage led to 12% of students experiencing homelessness since starting their studies, with that figure rising to 1-in-3 for estranged (33%) and care-experienced students (29%).
The NUS commented:
A student housing shortage has left hundreds of students in Scotland with nowhere to live in the first few weeks of their degree.
The National Union of Students for Scotland has highlighted that students are being forced to pay sky-high rents, experience homelessness, drop out or defer because they cannot find adequate housing.
Students in Glasgow, Edinburgh, and Stirling are among those worst affected, with some landlords increasing rent to profit from demand.
The aims of the Bill should be applauded. An increase in the standards of rental properties, including those for students, is very welcome. Aiming to give students the same rental rights as non-students is also a noble endeavour. However, many students lead different lives to professional or family renters. They rent on a yearly cycle because student lives are often compartmentalised into 12-month blocks. There are advantages to providing greater flexibility to student renters, but also significant pitfalls which should not be overlooked. The evidence from Scotland suggests that banning fixed-term tenancy agreements for students will lead to a contraction in the available market and an increase in rental prices. This may lead to an increase in student homelessness.
It is worth noting that Purpose-Built Student Accommodation (PBSA) will still be able to use fixed term tenancy agreements if the provider is registered with the government. However, PBSA can be more expensive than off-street student accommodation.
Given the instability that will be caused by joint periodic tenancies for students, the student housing market may move to a model where landlords let individual rooms in a house.
Students would no longer be able to rent a house with a group of their friends – a highlight of the student experience for many. Instead, there will be a bun fight over individual rooms in houses with strangers. Students will still be seeking these rooms as they become available on two-month notice periods. It is concerning that students could be forced into a bedsit lifestyle, with the inevitable knock-on effects of loneliness and mental health on the student population. Landlords may be resistant to this move due to licensing restrictions, and the advantage (to Landlords) of joint tenancies, that each tenant is liable for the rent of all tenants.
In summary, abolishing FTTAs is not good for students, landlords or the higher education sector. Abolishing FTTAs does provide greater flexibility for students, but it comes at the risk of creating student homelessness, instability, increased rental prices and further mental health challenges. It is recommended that provision is made for off-street student accommodation to be given the same exemption from the abolition of FTTAs as has been provided for purpose-built student accommodation.
How do the proposed changes regarding fixed-term tenancy agreements (FTTAs) align with the current needs and preferences of students in the rental market?
As an owner of an HMO rented to university students I concur with the huge penalty that I will suffer if student Fixed Term Tenancies are abolished. It is difficult enough to ensure a full house for an academic year as it is, with mortgage providers insisting upon joint tenancies to ensure the landlord can meet the mortgage payments even if one or more students drop out of education. To find a ‘strange’ student to share an already established house, possible in the middle of the academic year can be extremely difficult. We pride ourselves on looking after our student tenants in the upkeep of the building and being very flexible on rental payment dates etc. The Government seems far too keen on driving small private landlords out of the market. We only own one rental property to supplement our pension so the loss to us financially if we have to leave the rental market will be substantial as well as the removal of one more HMO from the student pool. This is a very short sighted bill.
Good article, if the bill goes through without changes to reflect students renting from private landlords, it will be a disaster for them. As a student landlord with over 20 years experience in Birmingham, I think I can make a fair comment. PBSA’s are, on average , 53% more expensive and of lower quality than many houses in the private sector, how does it help to push students in the direction of PBSA’s?
Interesting article that sets out my main concerns. As a student sector landlord for over 25 years, I’ve always been very flexible with my students as their circumstances change, providing early release from contacts where necessary, and other mid term changes, but incoming students do need certainly of tenure and confidence that their room will be available for the next academic year, without fear that an existing tenant might suddenly decide not to move on when their studies end. Or that they might be sharing a house with an eternal “student” who never made the leap from living in digs at the end of their studies. PRS should remain subject to fixed term tenancies to give students certainly.