Supply Shortage Reinforces Need for Regulation Re-think

This is back-to-school season and for the majority of university students who choose to move away from their family home during their university education, it’s a time for moving into rented term-time accommodation. 

The Renters Reform Bill (RRB) may change this, however, with the intention of providing tenants with more security of tenure actually having the potential to effectively end a tenancy system that has worked for decades for both landlord and tenant. 

Under the current system, tenancy agreements are based on the academic calendar, but changes proposed as part of the RRB will see this type of fixed-term tenancy replaced with periodic tenancies with no end date. This means that tenants, in this case students, can remain in a property until they decide that they want to move out, as long as they provide two months’ notice, extended from one month as part of the reforms.  

At first glance, this is a positive move that provides student tenants with more flexibility to remain in a rented property for as long as meets their needs. In reality, however, the change has the very real possibility of causing issues if students don’t vacate their rental premises in time for landlords to undertake any necessary cleaning and maintenance work before making properties available to those searching for somewhere to stay during their studies. 

With the reliable and steady supply of student digs disrupted, those looking for term-time accommodation will be faced with a reduced choice, while landlords may be forced to operate in other markets where periodic tenancies cause less of an issue. Many local authorities that preside over areas with large student populations use Article 4 Directions to remove rights to convert properties into HMOs under permitted development. This means that landlords may not be able to move back into the student market after exiting as a result of the bill, exacerbating the issue.

While fixed-term tenancies will still be permitted in purpose-built student accommodation (PBSA), I don’t think it should be assumed that halls will be the solution to the problem arising from the regulatory amendment. Although the sector has grown significantly in recent years, with what is a relatively stable asset attracting institutional investment, construction costs have risen significantly in the wake of the pandemic, stifling the progress of some projects.

Seeing some of the completed developments, you can understand their appeal, particularly amongst the growing numbers of overseas students who come from countries like China and India, attracted by the UK’s world-renowned education system to more than makeup for a decline in EU students recorded following Brexit. But, boasting modern finishes, impressive amenities and good locations means rooms in these large-scale developments command a premium that not all students will be able to afford.   

And that’s if they can find one because this issue comes at a time when the demand for student housing far exceeds supply. While Zoopla’s latest Rental Market Report reveals that stock of homes to rent is 30% below the five-year average, 2022 saw student numbers reach record highs exceeding 2.2 million, the trend for increased participation in higher education seen during previous periods of economic instability.

The direct impact that this imbalance between supply and demand is having on students has been well documented and is something I’ve seen first-hand with the daughter of a friend studying at Bristol University having to live more than 30 miles away in Gloucester.  

With UCAS projections placing the number of university applicants at 1 million by 2030, it’s set to get worse, not better, supporting the idea that the policy needs a re-think.

It is encouraging then to hear recent reports that the Bill is yet to progress through Parliament because while we feel that some of the proposals are sensible and will bring about positive change, this is one area that needs further discussion with informed parties representing landlords as well as tenants. 

* Richard Rowntree is managing director of mortgages at Paragon Bank *

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