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Government U-turn on energy impacts student lettings

Posted by Tom Walker in ,

Image courtesy of Unsplash, (View licence)

Student accommodation in the UK used to be as predictable as the tides, with price-setting, marketing, contract signing, check-ins and eventual check-outs following a metronomic schedule. As an investment, this predictability, along with world-class higher education institutions and a stable and measured political environment, helped turn a cottage industry into a desirable asset class that has, over the years, matured into something of a haven for institutional capital from all corners of the globe. After all, there are very few asset classes that consistently perform as well as UK student accommodation and that are also as well insulated from economic downturns.

Over the last 5 years in particular, this stalwart industry has weathered many headwinds, including a global pandemic. But the fog of political ineptitude emanating from Westminster over the UK's energy policy, specifically the spectacular U-turn on the two-year energy price guarantee, threatens to disorient even the steadfast rhythm of renting to students. The latest commitment to cap energy now only extends to April 2023, so offers no protection for tenancies starting next summer - tenancies that tenants are currently signing up for.

Only a few weeks ago, property managers were preparing to release their rents for next season and anyone opting to offer bills-included rents - which have grown in popularity with both supply and demand sides over recent years - could set prices secure in the knowledge that the electricity and gas tariffs were capped for two years. This certainty underpinned the ability to price in utilities at a sustainable level that was fair to tenants while not leaving landlords exposed if wholesale energy costs spiked. But, given the ephemeral nature of recent government policy, bills-included rents are now being viewed by many property managers as being completely unviable for the foreseeable future.

With the timing of this crisis coinciding with seasonal house-hunting in many university towns and cities, most property managers have been forced to abandon offering gas and electricity-inclusive tenancies altogether, with indications that even some PBSAs may follow suit over the coming months which would be unprecedented. As for the property managers who have decided to delay the release of their property prices until energy tariffs for 2023/24 are confirmed, they are at risk of missing the peak house-hunting season altogether.

All eyes will be on the PM and Chancellor over the coming weeks as the government looks to establish a new policy around energy. For the student rental sector, whether or not a new energy policy can turn the tide on the viability of bills-inclusive rents in the short to medium term remains to be seen. But belief that the government has genuine conviction in its policy will go a long way to supporting property managers in getting on with letting to students in a predictable manner as the season kicks off.

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