The Renters' Reform Bill: impact on student housing

StuRents investigates: How the proposed Renters' Reform Bill will impact the student lettings landscape in the UK

In April 2019, the Ministry of Housing, Communities and Local Government (MHCLG) consulted on to:

• Put an end to 'no-fault' evictions by repealing section 21 of the Housing Act 1988
• Extend the grounds for possession under section 8
• Remove landlords' ability to grant new assured shorthold tenancies (ASTs)
• Improve the processing of repossession orders

In November 2019, the Conservative party manifesto made a commitment to introduce a Renters' Reform Bill which would repeal section 21 and scrap new ASTs.

Why the change?

The Law Society explains some of the motivations behind the proposal of the Renters' Reform Bill:

"Section 21 is a leading cause of homelessness, with local authorities struggling to find the resources to act against rogue landlords under the Deregulation Act 2015.

However, there are some situations that warrant landlords evicting the tenant before the end of the tenancy. We, therefore, favour proposals to widen the grounds for possession under section 8."

Lessons from Scotland

In February 2023, StuRents launched our new webinar series, StuRents' Quarters, where we explore data insights from the last quarter to analyse trends across the sector, and partner with industry experts to understand hot topics in student accommodation in greater detail. Our expert panellist this month was Peter Grant, founder and chairman of Sandstone Management, a student property management firm in Scotland. Scotland introduced its own version of the Renters' Reform Bill, the Private Housing (Tenancies) (Scotland) Act, in 2016, so our audience was eager to ask Peter about that country's experiences with the reforms and their impact on lettings in general, and student lets in particular.

Grant's theory is that Scotland is quicker to try new things than England. They tend to be eager to try new ideas. The widely held view is that England then watches the results and implements the strategies that have worked while learning from those that haven't.

Impact on landlords

To understand what England's implementation of rental reform might mean for our landlord and property manager clients, we asked,
"Has the ban in fixed-term tenancies resulted in changes to marketing practices given the uncertainty over when a student can leave the property, and how have these been mitigated?"

According to Grant, there has been little meaningful change in Scotland's private rental sector as far as student lettings are concerned since the implementation of rental reform in that country. The majority of landlords have adapted both their marketing and property management approaches as follows:

• Marketing their properties much earlier. This means that the later in the season students start looking, the less stock there is available.
• Focusing on the exit date of current/previous tenants rather than the entry date for new tenants. Since students don't have the pressure of moving out at the end of a short-term tenancy, landlords now treat these tenancies much as they would treat any private rental.

StuRents' co-founder Tom Walker has a different view. He says,

"In reality, a bigger concern is the impact on students' range of choice that would likely result from any disparity in rules governing PBSAs and HMOs. Moving from PBSA to HMO from one year to the next could become more challenging for PBSA tenants, who would still be subject to a mandated tenancy end date. Limited by the choice of HMO stock that happens to become available around the time they move out, they could inadvertently be forced to rent another PBSA room.

This impact on choice could also be felt by students looking to move from one HMO to another. Currently, all properties are released in a city around the same time, which prioritises student choice and rewards good quality houses with plenty of interested house-hunters. If properties are, instead, released to the market in dribs and drabs, reduced choice may force some students into lower-quality properties."

Impact on Scottish students

Students appear to be adapting to the changes in a similar way, too. StuRents asked,
"Given the ban on fixed-term tenancies in Scotland, are students typically choosing to stay in their properties for a longer term than the typical pre-fixed term length?"

Grant observed that students may indeed be staying in accommodation for longer to avoid losing their homes.

Walker suggests that the effect is likely to be similar in England, describing the "frenetic scramble [of] thousands of students" being impacted by the greater flexibility student tenants will have in serving notice, meaning property managers will have less time to market properties when they become available ahead of the following academic year. He says,

"Under the Renters' Reform Bill, tenants will only need to give a maximum of two months' notice to end a tenancy. This is ultimately a free option that tenants can choose to exercise at their discretion, so it is expected that, unless encouraged, they would only serve notice a month before they intend to leave. This will naturally delay the property manager's ability to market the property until late spring, so it is reasonable to assume that the house-hunting season will therefore evolve into an extended search season that spans the academic year."

However, far from the "doom and gloom" some pundits predict, Walker suggests,

"A change like this would represent a huge shift from the status quo but could serve property managers well; a more evenly distributed house-hunting season is easier to resource and less chaotic."

Keep calm and rent on

Following the fixed-term ban in Scotland, Grant reported very little change in appetite for student accommodation from HMO investors. In fact, as Tom Walker explains that, in all likelihood, any contraction in supply would be unlikely given the growing line of institutional buyers looking to expand their student HMO portfolios in the face of pervasive Article 4 directives. The sector continues to thrive as students flock to respected Scottish universities in ever-greater numbers.

So, while the UK government is still in the process of implementing rental reforms (with many wondering if it will actually be implemented this year at all), Scotland has already introduced its own version of the Renters' Reform Bill. Based on the experiences of landlords and property managers there, the impact on the private rental sector, particularly for student lettings, has been minimal. Landlords have adapted by marketing their properties earlier and focusing on the exit date of current tenants, while students may be staying in their accommodation for longer periods to avoid losing their homes. This already happens in some student accommodation in England, where students prefer to stay in the same accommodation for the duration of their studies to avoid rental increases, among other reasons.

Thus, despite the legislative changes, the appetite for student accommodation from HMO investors in Scotland remains strong, indicating that the sector continues to thrive.

Student accommodation continues to be a property investment that delivers measurable returns. For data insights to help guide your student property investment decisions, contact our research and insights team, StuRents Intelligence, at research@sturents.com.