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The impact of private rented sector reforms on the student accommodation market

Posted on 18 August 2023

The Renters (Reform) Bill has sparked much debate since its first reading in Parliament in May 2023. We covered this in Private rented sector reforms announced for landlords and tenants. Here, we consider its impact on the student accommodation sector.

Exemption for Purpose Built Student Accommodation

At the time of writing, Purpose Built Student Accommodation (PBSA) is exempt from the changes proposed by the Bill if the PBSA provider has signed up to government approved codes. These codes outline the obligations of PBSA landlords and set benchmark standards for the accommodation they manage. Around 95% of PBSA providers are already signed up.

Why the exemption?

In a 2022 paper titled 'A new deal for renting: government response', the Government intimated that the PBSA regime is different. It is clearly defined, tenants do not expect to stay long-term and it is already subject to robust rules through the government codes.

PBSAs also have a distinct business model. The PBSA model is akin to university managed accommodation with tenancies typically starting at the beginning of an academic year for a fixed term of one year. The exemption retains flexibility for PBSA providers.

The exempted status of PBSAs will be viewed positively by PBSA investors - but what does the Bill mean for investors in private rented sector (PRS) student accommodation?

Uncertainty for investors in PRS student accommodation

Abolishing fixed term tenancies for PRS student homes could cause havoc for the student accommodation market, with landlords not knowing if they will get possession at the start of the academic year. There is concern that this may even deter investors from student lets, which would put considerable pressure on a market already in short supply.

Students may not appreciate the uncertainty as many of them tend to secure accommodation well in advance of the academic year. The disparity between PBSA and PRS student accommodation could make any transition for students from one to the other more challenging. For example, a student who is moving out of PBSA accommodation that has a fixed end date into a PRS property (where supply may be limited at the time they are moving out) could through lack of choice, force a student to remain in PBSA accommodation.

Scotland introduced its own version of the Renters Reform Bill in 2016. According to an investigation carried out by StuRents, when those changes were made there was little change in appetite for investment into PRS student accommodation.

Perhaps this is because the academic season regulates these difficulties. There is naturally a supply and demand point at the end and start of each academic year with most students preferring to spend summer at their family home.

Will the Government change its mind?

It will be some time before the Bill receives Royal Assent. Even as the Bill makes its journey through Parliament, there are signs that not all is going to the plan. It is reported that the Government is considering an amendment to the Bill that could cater for all PRS student homes - whether that means extending the PBSA exemption to all PRS student homes is not currently known.

That the Government may be re-thinking its approach is rather telling of the unsettled views of landlords, tenants, politicians, and practitioners alike. We await to see how it all unfolds.

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