The Renters’ Rights Bill had its first reading in the Commons on 11 September 2024, only 10 weeks after a Labour government was returned to power, indicating a serious legislative intent to press quickly ahead with the abolition of no-fault evictions (known at Section 21) following the commitment made in the 2024 Labour Party Manifesto.
The Bill has considerable continuity from the Renters (Reform) Bill championed by Michael Gove, which fell with the end of the Conservative administration.
This speed of this legislative action and the change of emphasis in the title (from ‘renters reform’ to ‘renters rights’) is indicative of the current Government’s view that this matter has been discussed long enough and it can be expected that with a large parliamentary majority, that few changes (but with some refinement) are likely to be made. As the Deputy Prime Minister, Angela Rayner MP, said: ‘There can be no more dither and delay’.
What is more, Housing Minister Matthew Pennycook has said the Renters’ Rights Bill could be enacted ‘within the first half or around summer next year’, and the Guide to the Bill stresses that
We will introduce the new tenancy for the private rented sector system in one stage. On this date the new tenancy system will apply to all private tenancies – existing tenancies will convert to the new system, and any new tenancies signed on or after this date will also be governed by the new rules. Existing fixed terms will be converted to periodic tenancies.
So, the changes proposed will affect students studying today who are looking to rent houses for 2025/26, which many of them will do before the end of December 2024.
Background
HEPI has kept close tabs on the proposed tenure reforms that will affect students with five previous publications (referenced at the end of this blog) from May 2023 to June 2024. Each of these articles stressed the special nature of student accommodation and the need to maintain the availability of accommodation for students in line with the academic year.
This initial approach to tenure reform, under the previous Conservative government and Michael Gove, meant students would be treated the same as any other tenant group, granted security of tenure and students would come and go giving notice to quit whenever they wished. As many pointed out, this would have made it almost impossible for student housing suppliers to rent housing in line with the academic year, and this rightly raised fears about the longer-term supply of housing available to students at a time when student housing shortages are already occurring.
Gove responded to these fears as expressed by UUK, HEPI, Unipol, and sector bodies as well as the National Residential Landlords Association (NRLA) and the then Conservative Government by:
- Removing purpose-built student accommodation (PBSA) from the scope of the bill
- Leaving student off-street properties within scope but making the concession that those renting to only students would be able to seek repossession of their properties between June and September each year in order that they could rent their properties to the following year’s students.
The Renters’ Rights Bill maintains this acknowledgement that the student market requires this special consideration and that the supply of housing to students should be available each academic year.
This division between PBSA and off-street tenure will be new, as previously, with the exception of students living in university properties. All tenants fell under the same tenure. Under these proposals, PBSA tenants will become common law tenants, while others will become assured tenants.
So what has changed, and what happens now?
The division of PBSA from off-street housing remains, although some of the details have yet to be finalised. Comfort for PBSA providers can be obtained from the Bill team, who say
It was always our intention to exempt private PBSA that had signed up to the government approved codes of practice from the assured tenancy regime. There is already a delegated power in the Housing Act 1988 that would allow us to do this, so it did not need to be included in the Renters (Reform) Bill. The exemption would remove assured status from private PBSA tenancies, as is currently the case with university managed accommodation. This will mean that those renting off-street houses fall fully within the scope of the Act whilst tenants in PBSA will not.
Off-Street Tenants
Maintaining the supply of accommodation in line with the academic cycle
Under the Renters (Reform) Bill, tenants could give two months’ notice and leave a tenancy – fixed-term tenancies having been abolished. Gove made a significant concession to landlords by including a provision that notices to quit could not be given within the first four months of the tenancy, which would have meant that tenants could not leave their tenancy within the first six months. This provision has been removed from the Renters’ Rights Bill, so all tenants will now be able to give two months’ notice to leave their tenancy at any stage.
The Guide makes clear the government’s reasoning for this change:
All tenancies will be periodic, with tenants able to stay in their home until they decide to end the tenancy by giving 2 months’ notice. This will end the injustice of tenants being trapped paying rent for substandard properties and offer more flexibility to both parties to respond to changing circumstances.
The effectiveness of this market-driven pressure will partly depend on housing supply: if supply is tight, then moving may not be a realistic option. Many students live in houses of multiple occupations (HMOs), and the vast majority of these are covered by licensing under the Housing Act 2004, where a licence is required to ensure that those houses meet local authority standards (including maximum occupancy levels and that inspections are carried out to ensure compliance) so, in theory, students being able to ‘vote with their feet’ will either have little effect on standards or will show that licensing is not working properly in improving and maintaining the standards it is meant to.
The Guide to the Bill references the need to be able to ‘move tenants on’ saying.
In some sectors, it is necessary to move tenants on where accommodation is intended for a particular purpose, for example where the current tenant may no longer need the accommodation or is no longer eligible to occupy it. We will therefore introduce a limited number of possession grounds to ensure there is an adequate supply of properties in vital sectors such as temporary and supported accommodation, and for critical housing schemes such as ‘stepping stone’ accommodation.
It is interesting that students are not specifically referenced but under the grounds for possession it is made clear under Ground 4a that repossession can be obtained if ‘a property is let to full-time students and is required for a new group of students in line with the academic year.’
Here, the repossession notice period is four months, and this must take effect between June 1 and September 30. In the Bill, there is a stipulation that the landlord must have informed tenants of their intention to seek repossession between June and September at the time of signing the tenancy. In seeking repossession the landlord must then let the property to students ‘or to people who the landlord reasonably believes will become full-time students during the tenancy’.
In the previous Renters (Reform) Bill it was originally proposed that the right to repossess would only apply to joint tenancies. This restriction was quickly dropped, and the right to repossess was broadened to include any property only occupied by students. In the Renters’ Rights Bill, this ground 4a repossession has been restricted to HMOs (shared student houses), so houses and flats with fewer than three occupants will not carry this right.
It is difficult to follow the logic of this change. If the argument is that couples and sharing partners, having been students, are more likely to want to remain in the property after graduation then the removal of the right to repossess in line with the academic year will simply see these smaller properties leave the student market. Whenever one or both occupants leave, the property will simply be re-let in the general marketplace and is likely to go to local residents / professional renters. These properties are likely to move outside the academic letting cycle and will be lost for student occupancy.
There is also a Ground 4 for possession that ‘Can only be used by specified educational establishments.’ The Government’s intention here is that ‘Some universities let accommodation to non-students during academic holidays, e.g., to conference guests during the summer. The ground allows them to do this whilst guaranteeing that those short-term visitors or tenants can be evicted if needed to house incoming students.’ Here the notice period is only 2 weeks and can be given at any stage during the tenancy.
The new proposed system of repossession is likely to work for the student off-street market but the timing of when repossession can be sought does not reflect students who begin studying in January (as some do) or the postgraduate market who often need accommodation across summer until they submit dissertations in mid-September: for them, this system may make them less attractive tenants for many landlords supplying the student market.
Some landlords have asked, ‘What if a student does not leave at the end of their assured tenancy?’ but under the current system of fixed-term tenancies, if a student fails to leave, it still requires a lengthy wait for a court eviction process to remove them, causing massive inconvenience to both the landlord and any incoming tenant. The reality is that almost all students leave because they no longer have a reason for being there: they have either rented somewhere else or are leaving the town/city at the end of their course.
For those students who want to remain in their properties for a second year (and around 30% of students do that), it should not be necessary to end their assured tenancy because it will simply continue if there is a rent rise, which will be given to students in the relevant proscribed form, giving two months’ notice of it taking effect. However, in the Bill Explanatory Note, it says ‘Ground 4 requires a court to award possession when the tenancy is for a fixed term of not more than 12 months, and during the 12 months prior to the start of the tenancy the accommodation was a student letting that is excluded from being an assured tenancy.’ So, at present, it looks as though landlords will have to seek to bring the previous tenancy to an end and issue a new one in order to preserve their repossession rights. The Government has, of course, abolished fixed-term tenancies, so the Bill and this guidance needs further thought.
Rents
Under the Bill, rents can only be charged one month in advance. For much of the private rented sector, this is the normal advance payment sought, but for students, many are charged rent termly and this will stop.
It will no longer be possible to sync rent payment dates with maintenance loan payments and this change may well result in the increasing use of guarantors and / or large deposits being levied to try and offset the increased risk of rental default. All in all, this means a considerable increase in administrative load for landlords, particularly as ‘monthly’ means from the date of signing a tenancy, so rent due dates are likely to fall differently across a landlord’s portfolio.
There are some new restrictions on rent rises: rents can only be increased once every 12 months, and if a tenant believes the proposed rent increase exceeds the market rate, they can then challenge this at the First-tier Tribunal, which can adjust the rent. In reality, most student rents only change annually, and unless the proposed rent rise is outrageous, this is unlikely to be challenged. The First-tier Tribunal can also raise rents as well as lower them so it is unlikely that frivolous referrals will be made.
What will being able to leave an assured tenancy giving two months’ notice mean for students?
This greater flexibility for students living in off-street houses will be, by far, the most significant outcome of the bill for student housing, although the other aspects of the Bill will also apply (summarised briefly later).
A variety of scenarios can be foreseen, and here are a few of them:
- A student gives two months’ notice at the start of the tenancy because they are leaving their course or have failed to obtain a university place because of lower-than-hoped-for academic grades. Currently, many better landlords allow students to leave their contracts because the option of insisting on rent payments from an ex-student is likely to result in either a bad debt or a very slow and spasmodic repayment. In these circumstances, many landlords negotiate a surrender payment and seek to let the room early in the academic cycle. The fact that students can now leave ‘by right’ only marginally increases the existing risk for landlords.
- A student gives two months’ notice mid-year. This is a significant risk for a landlord because they will lose rental income if they cannot find a new tenant. Of course, the question arises as to why this notice might be given. It is likely that this will be because of friction between tenants or the landlord. Remember that two months’ notice still has to be given, so this is unlikely to facilitate a quick getaway. It is unknown how many students will seek to move mid-year, but if a significant number do, it is fair to assume they will be looking for somewhere else to live, and so the lettings market for student accommodation will remain partially active throughout the year, increasing the likelihood of filling empty rooms. At present, because most students are tied into fixed-term tenancies, letting activity mid-year is necessarily low.
- A student who is under a fixed-term tenancy pays rent throughout June (and in some cases throughout July) and decides that, having completed their exams in early May, they can save a significant sum of money by leaving their accommodation then. This may well be the landlords’ greatest fear: that they will see their houses emptying out with a loss of between one and two months’ rent. If the house is left empty, without any students living there, that house will also become liable for Council Tax (since it is the student presence that conveys exemption). Based on the average Council Tax for a Band D property for a two-month period, this would amount to around £360.
All these scenarios are based on the assumption that students are renting their rooms on single tenancies.
Joint Tenancies
Around 50% of student tenants renting in off-street housing are joint tenants. Generally, joint tenants are treated not so much as individuals but as a single indivisible body. Effectively, there is one tenant – it just happens to comprise several individuals. All those individuals have equal rights and responsibilities for the tenancy. They can be held liable for the tenant’s obligations as a group, or any one or more of them can be held individually (severally) liable for some or all of the tenant’s obligations.
Under the Renters’ Rights Bill, any one of the individuals comprising the joint tenancy can give notice to quit their (now) assured tenancy. There is no need for consensus among the joint tenants. Any notice given by a single member of a joint tenancy will end the whole joint tenancy, and, in theory, all the occupiers should vacate the property on or before the notice expires unless those who want to stay agree on a new tenancy with the landlord. If no new tenancy is agreed upon and anyone remains in occupation after the notice expires, those remaining in occupation are (under current law) potentially trespassers liable to pay mesne profits for the use of the property or even double the rental value of the property.
So what will happen if one party to the joint tenancy gives notice and the other students want to stay?
If a joint tenant ends the tenancy early and the landlord can re-rent the whole house, then the landlord may confirm the ending of the tenancy at that point – or the landlord can talk to the existing tenants and work out a financial settlement in order that the other parties can stay. In any event, anyone ‘staying’ will need to sign a new contract as the previous tenancy has ended.
Remember, it will be in both the remaining student's and the landlord’s interest to reach an acceptable solution. That is likely to be based on some ‘deal’ being reached between those who want to stay and the landlord involving some payment covering part of the shortfall in rent.
There are a couple of caveats that may affect this scenario: first, an assumption is being made that all the students can be got into a room (virtually or actually) to discuss properly what should happen – that can be more difficult than some may think. Secondly, the approach is likely to vary depending on how high tenant demand is in a given area for rented accommodation and how large the landlord is.
Risk
It is difficult to predict how many students will seek to give notice during the academic year, but it is important to remember that student rents are mainly based on annual rent because, between student lets, the property remains empty, generating no income. If ‘leaving early’ becomes commonplace, then three outcomes can be foreseen:
- Rents will rise to cover an anticipated shorter letting period. This increased weekly rent across a shorter letting period will not affect the cost of accommodation for those seeking to leave their accommodation in May, but it may end up costing students who want to stay longer because their weekly rent will have risen.
- Landlords may change their letting cycle so that the opening month is June (rather than the more common July) so that the notice taking effect in May is taken into account. If a student says ‘why should I pay rent on this property in May when I only want to live in it later in the year?’ the answer may well be ‘because otherwise I am not letting it to you.’
- Some landlords may conclude letting to other rental groups is now more profitable with less risk and those properties leave the student market, reducing supply.
Just one final point, students wishing to give notice in, say May, will need to remember to do so in March. It will be no good waiting until May and then saying they want to leave.
What else does the bill cover?
Students living in off-street properties will benefit from the wider changes in the Bill, and these include:
The introduction of a new Private Rented Sector Landlord Ombudsman. All landlords will have to be registered, including those landlords whose properties are being managed by an agent. Previously, only properties being managed by an agent were covered by a number of redress schemes and redress will now cover 100% of the sector and be focussed on a single scheme. That said, few students who had access to a redress scheme (which is currently available to anyone renting through an agent) previously made complaints. Although this wider roll-out of redress ‘brings tenant-landlord complaint resolution on par with established redress practices for tenants in social housing and consumers of property agent services’, any compensation paid is unlikely to reflect any educational disruption or its effect on academic attainment.
The Property Portal (as it was under the Renters (Reform) Act) has re-emerged as the Private Rented Sector Database to help landlords understand their legal obligations and demonstrate compliance (giving good landlords confidence in their position), alongside providing better information to tenants to make informed decisions when entering into a tenancy agreement. Landlords will need to be registered in the database in order to use certain possession grounds.
Tenants will have strengthened rights to request a pet on the property, which the landlord must consider and cannot unreasonably refuse.
A Decent Homes Standard will be applied to the private rented sector. This is likely to be a lower standard than that insisted on within HMO licensing and is unlikely to make much difference to most student tenants. Likewise, ‘Awaab’s Law’ is being applied to the sector, setting clear legal expectations about the timeframes within which landlords in the private rented sector must take action to make homes safe where they contain serious hazards. Again, for licensed properties, these expectations are already within those standards.
Ending the practice of rental bidding by prohibiting landlords and agents from asking for or accepting offers above the advertised rent. Landlords and agents will be required to publish an asking rent for their property and it will be illegal to accept offers made above this rate. Rental bidding was not a significant problem in the student sector, but it was a big problem, particularly in London and higher-cost housing areas, for professional renters.
Local authority enforcement has been expanded, but so far, no additional resources have been announced to enable enforcement to avoid the stringent cuts being made to local authority services as their funding continues to decline.
Purpose Built Student Accommodation
How exemption is achieved
The Government is likely to exempt private PBSA that have signed up to the government-approved codes of practice from the bill by extending by changing ‘specified educational institutions’ to ‘specified institutions’ under provisions to be found in the 1988 Housing Act. This change removes assured status from those PBSA tenancies and the requirements that are specific to being an assured tenancy will no longer apply unless specific provision has been made to bring them into scope. PBSA tenancies will be common law tenancies, which means that fixed-term tenancies can continue in those properties. This change will place all code PBSA (whether private sector or institutional) in the same position.
This shift away for PBSA tenants from assured shorthold tenancies means that tenants are common law tenants, and any grounds for possession will be based on a breach of the contractual agreement reached between landlord and tenant. That agreement could stipulate a period of rent arrears, after which removal could be sought or removal if a tenant ceased being a student. So long as the contract contained no unfair terms then repossession would be mandatory.
Because these students will be common law tenants, some other tenancy-related obligations and protections linked to having assured tenancy status will probably fall away unless the government specifically brings them ‘back into scope’. The only hint of that happening in the guidance to the bill relates to the Decent Homes Standard, which says, ‘The bill also includes a power to extend the scope to include other types of tenancies and licences.’
Deposit Protection
The current deposit protection regime only applies to assured tenancies, so with PBSA tenancies no longer being assured, the current requirement to protect a deposit will be removed. Those students whose deposits need protection under their old tenancies will continue to hold that right until the end of their tenancy.
When deposit protection was introduced in the Housing Act 2004 (coming into effect in 2007) universities, being ‘specified bodies’ did not have to protect their deposits through a third-party scheme (and the same exemption applied to registered social housing providers). The theory was that educational institutions were already subject to other regulations, and deposit protection was unnecessary because a tenant’s deposit was not at risk.
It could be argued that this comfort is not present in the private sector, where insolvencies have taken place. It could also be argued that universities are not quite the citadel of solvency that they once were and that university tenants would also benefit from the comfort of deposit protection. Many universities (estimated at 40%) do not charge deposits, and requiring educational institutions to protect their deposits may have the positive result of the decline in the charging of deposits.
The interplay of the Approved Codes of Practice and Legislation
It is relatively easy to change the requirements of the Approved Codes (subject to government approval), and the Approved Codes could insist on deposit protection being agreed upon as a condition of membership.
Other areas where common law tenants’ rights might be being reduced by this new approach, could be countered by putting those obligations within the codes. This would then mean that PBSA providers either agree to operate those rights, or they would no longer be members of the Codes and then they would fall under the assured tenancy provisions within the bill which would mean they have to do those things anyway.
There are some issues with Changing the Membership of the Codes and what happens if a member is removed from a Code for non-compliance. In the private sector, suspensions and removals happen a few times a year, and new members join all the time. These mechanisms are still to be sorted out, but generally, if a member is removed from a Code, assured tenant status should be implemented as quickly as possible. For new members joining a Code, tenants signed up before membership should keep their assured tenant status until repossession is sought underground 4a.
Conclusion – How is this likely to affect students in the longer term?
The straight answer (and this applies more broadly to all tenants gaining from this new flexibility brought about by tenure reform) is that no one knows. The $64,000 question is, will this uncertainty result in private-sector landlords reducing the supply of rented accommodation? Although there is evidence of some contraction in the rented sector caused by a harsher tax regime and great interest rate charges, the overall contraction of the rented sector seems to have stalled. There is an issue, however, about whether the bill will cause shifts within the sub-sectors that exist within the private rented sector envelope.
The suspicion is that landlords will be less willing to let benefit tenants and that the new complexity and uncertainty surrounding the student off-street market may see some of that supply move to professional letting. It could be that the big gainers from this tenure reform are longer-term family renters and professional renters and that the poorest and most vulnerable in society, together with student renters, could become ‘collateral damage’. These reforms are well-intentioned by those who campaigned for them, but that does not mean all tenants will be winners from these changes.
The other issue is, will rents rise as a consequence of this reform? There is the very basic macro-economic perspective that being a property owner is a commercial investment and that the greater the risk in investment, the higher the expectation of a return. Increased perception of risk and how that might manifest itself may be enough to see rents rise, particularly in the student sector, where part of the annual renting cycle is now open to unknown levels of change.
It is unlikely that the Government will move much from their proposals in the Bill and it can be seen that the Labour Government are keen to minimise the ‘special case’ of students living in the community, perhaps for the sake of not introducing too much complexity in the Act. It was also the case that if the Government had made students an entirely ‘special case’ with the fixed-term tenancy remaining, this might have made student renting more favourable than other renting, and the market would then have had other ‘collateral damage’.
This is why an earlier HEPI blog suggested creating a special student tenancy with some consumer-related positives to counter-balance the advantages of retaining fixed-term student tenancies. That has not happened, nor have a number of matters been suggested to improve student renting:
- restricting or ending the use of guarantors (and stopping the practice of asking for a year’s rent in advance);
- the automatic release from a tenancy entered into months before it actually begins (to dissuade the ludicrous practice of students renting their next year’s accommodation almost a year in advance of that); and
- the automatic release from a tenancy if a student left their institution or their course.
In fact, the shortening of the rent payment period to monthly is likely to increase the use of guarantors.
There may be scope for making some limited changes in the Bill Committee (which will sit soon and is scheduled to report by 28 November 2024) and two matters have been suggested earlier: extending the 4a repossession proposal to all student-occupied assured tenancies (as opposed to just HMOs) and ensuring that those student tenants that wish to remain in their property can do so without having to sign a new contract.
The big win in the Renters’ Rights Act is for students who will be able to give notice and end their tenancy within two months at any stage, although it is likely that this will speed up the preference of some landlords to move away from the student market to the professional lettings market or Airbnb (where those markets are strong). Professional tenants stay longer and, in shared houses, do not leave annually or all at once.
For those students renting off-street properties, in the short-term they will benefit from the increased flexibility and regulation that this Act will bring but in the longer term this gain may be tempered by a reduction in housing supply (with all that implies on choice and cost) and that possibility could hang over the Act’s effectiveness as it seeks to improve tenant rights.
As was said earlier, no one knows what will happen, and so, in the summer of 2025, the ‘white knuckle’ ride will begin.
