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The Renters’ Reform Bill, set to reshape the UK’s rental landscape, is poised to have significant implications for Purpose Built Student Accommodation (PBSA) properties. While the bill aims to enhance renters’ rights across the board, PBSA appears to be in a unique position.
What Does the Renters Reform Bill Mean?
Eviction Notices
Under current regulation set down by the 1988 Housing Act, landlords of assured shorthold tenancies are permitted to terminate tenancies in two ways:
- Section 21: Landlords can provide a two-month notice prior to eviction without the need to provide a reason.
- Section 8: Landlords are permitted to evict a tenant if they have broken the terms of their agreement. Such “ground for possession” may be grounds such as rent arrears or illegal activity, to name but two.
The proposed Renters’ Reform Bill is set to abolish Section 21 evictions, requiring landlords to have a valid reason for eviction under Section 8. The grounds for eviction under Section 8 are also being expanded, with the Renters Reform Bill extending the threshold of rent arrears to three months rather than two.
Changing the nature of tenancies
The Bill also seeks to replace existing fixed-term tenancies with rolling periodic tenancies, aiming to provide tenants with greater security.
Existing tenancies would not be impacted initially and would instead move over to the ‘new’ system after the second implementation date, at least 12 months later. After this point, fixed-term tenancies will no longer be granted.
An important factor in this change is that it would provide greater powers to tenants who would be able to end their tenancy at any point with just two months’ notice. For PBSA operators, this will pose a greater risk of increased void periods should tenants opt to end their tenancy prior to the end of an academic term.
PBSA Exemption: A Likely Scenario
The current draft of the Renters’ Rights Bill suggests that PBSA providers will likely be exempt from some of the bill’s key changes, particularly those related to fixed-term tenancies. This exemption is expected to apply to PBSA providers registered under government-approved codes. The reasoning behind this potential exemption is that PBSA tenancies are not considered “assured” and are instead governed by the Protection from Eviction Act 1977.
Implications for PBSA Operators
- Continued Use of Fixed-Term Tenancies
If the exemption is implemented as anticipated, PBSA providers will be able to continue offering fixed-term tenancies that align with academic terms. This would give PBSA a significant advantage over private student housing providers, who may be required to shift to periodic tenancies.
- Competitive Edge
The ability to maintain fixed-term tenancies could provide PBSA with a competitive edge over other forms of student accommodation. This could potentially lead to increased demand for PBSA properties as they offer more stability and predictability for both students and operators.
- Potential for Growth
With the possibility of private landlords exiting the student housing market due to increased regulations, PBSA investors might see an opportunity for growth. The reduction in competing properties in the HMO market could lead to lower void rates and higher rental yields for PBSA assets.
Challenges and Considerations
- Market Imbalance
The exemption of PBSA from certain aspects of the bill could create a “dual market” in the UK student accommodation sector. This might lead to an imbalance between PBSA and private student housing providers, potentially exacerbating the existing supply issues in student accommodation.
- Regulatory Compliance
While PBSA may be exempt from some aspects of the bill, operators will still need to ensure compliance with other regulations, including those related to property standards and energy efficiency.
Looking Ahead
As the Renters’ Rights Bill moves through its final stages, PBSA operators and investors should stay informed about any changes to the proposed exemptions. While the current outlook appears favourable for PBSA, the specifics of the exemption and its exact impact remain subject to final legislation.
The PBSA sector seems poised to navigate the changes brought by the Renters’ Rights Bill from a position of relative strength. However, operators must remain adaptable and prepared for potential shifts in the student housing landscape as the bill’s implementation draws closer.
