The Government’s Renters’ Reform Bill includes a series of contentious plans for landlords, including the requirement for periodic tenancies. What will this mean for the ever-growing student rental market?
It’s fair to say the most topical announcement from the Renters’ Reform Bill is the abolishment of Section 21 evictions. Many landlords remain concerned about what this will mean for their property investments in the future and the options that will be left available to them once Section 21 is gone.
However, another fundamental change for landlords to be aware of is the replacement of fixed-term tenancies with periodic tenancies. This change will see all tenants on ASTs moved onto a “single system of periodic tenancies”.
What is a periodic tenancy agreement?
A periodic tenancy agreement is a rolling tenancy with no set end date. Usually, tenants can roll onto a period tenancy following the end of a fixed assured shorthold tenancy (AST), especially if they think they’ll move before another fixed term ends.
Period tenancies offer flexibility to tenants and landlords, as neither is tied into a fixed contract until a specified date. This arrangement can be suitable for landlords if they’re likely to need to repossess the property to sell it.
However, for many landlords, periodic tenancies remove an element of financial security as they cannot guarantee income for a fixed period, e.g., two years. Typically, tenants on periodic tenancies only need to give one months’ notice, increasing the chance of void periods and loss of income for the landlord.
How will this impact the Student Let market?
The current fixed-term system works to benefit both landlords and students. Fixed-term tenancies typically start in time with the academic year and end as students break up for summer or leave their university towns. This allows landlords sufficient time to prepare for marketing the property and ensures ample supply for an increasing cohort of students who rely on the PRS whilst at university.
However, this will undoubtedly change once the student let market are moved onto periodic tenancies. The main concern for landlords will be whether their tenants decide to leave the property in time for new students to move in at the start of the year.
If tenants decide to stay in the property longer than is currently permitted, the supply of properties available to students will reduce drastically. This will likely push up rents, which will only cause more damage. A recent poll by Save the Student revealed 41% have considered dropping out of university due to high rents and bills.
Furthermore, landlords will also be more at risk of void periods. If tenants leave during the academic year, it will be harder to fill the property than during the peak periods. This may impact rental yields and the overall viability of the investment altogether.
As a result, many landlords may decide not to rent their properties to students. With the market heavily reliant on term times, some may choose to err on the side of caution and let to families/working professionals instead to ensure financial stability. This will just increase the pressure on the wider buy to let market.
The Government’s Plans for the Student Market
While private rentals will need to enforce periodic tenancies, Purpose Built Student Accommodation (PBSA) will not. As part of the Bill, the Government announced that PBSA would be exempt, and could continue to offer fixed-term contracts.
Typically, students will leave PBSA after their first year of university and look to move into the PRS. These students could now face a very limited supply of property when they need to move out.
What’s clear is the Government needs to review plans for periodic tenancies regarding student homes. The new proposal simply will not work. The PRS is an essential backbone of student housing, and implementing these new tenancies could see many landlords leave the sector.
Landlords need better support in their property investment plans to ensure their portfolios remain a viable investment. More needs to be done on this announcement to be sure it meets the needs of landlords and students alike. Find out more in our recent blog: Guide to Becoming a Student Landlord.
