Rocky Road Ahead For Landlords Of Student Homes

Many properties currently let as student digs could end up empty as freshers’ weeks are cancelled and universities plan to move lectures online.

As students stay away, some property experts believe the impact of Covid-19 on the rental sector in university towns could be ‘catastrophic’. If universities use online-only teaching, enabling students to avoid paying rent by studying at home, buy-to-let landlords could see a huge fall in the number of tenants when the next academic year begins in October.

David Cox of trade body for lettings agents, Arla Propertymark, said that student accommodation agents are contemplating having to shut up shop for the next 12 months. And a report from trade union, University and College Union, has already predicted a fall of 16pc in the number of British students in the next academic year.

Despite there being much uncertainty over how universities will continue teaching, both Cambridge and Manchester Universities have decided to move all lectures online next term. Andy Squire of the students’ union at the University for the Creative Arts said that some students may decide to defer for a year as they will have to confirm offers with UCAS by June 18.

Many smaller landlords who rent out individual properties to students are heavily mortgaged and can ill afford a drastic reduction in their income. Anthony Hart of property auction house Allsop, commented that the situation will be worse for investors in cities with less highly acclaimed universities.

Threat to private sector landlords

The situation in towns such as Bolton and Huddersfied, he added, is already apparent. Mr Hart quoted the example of a landlord in Hull who owns 45 houses, has no tenants for next year and is trying to sell up. Competition to find new tenants for these properties could become ferocious and result in a price war.

According to estate agency, Hamptons International, 10pc of all properties in cities such as Nottingham and Exeter qualify for exemption from council tax because they are let to students.

The pandemic will aggravate the threat from the purpose-built student accommodation (PBSA) sector to squeezed landlords in the private sector. Unite Students, a PBSA provider, waived rent for students who fled lockdown at a cost of £100m. Unsurprisingly, the company expects to gain significant market share from private landlords.

However, Lizzie Beagley of estate agent Savills, pointed out that because the PBSA relies heavily on foreign students, they are in fact endangering the sector. This is because universities have predicted a £7bn drop in overseas student fees.

Nevertheless, landlords may be able to reap the benefits if they can survive the next year. Simon Thompson of student lettings website, Accommodation for Students, has forecast a surge of students in September 2021.

New rules on deposits and fees

If landlords fail to comply with new rules regarding deposits and fees charged to tenants, they could face fines of up to £30,000. Property owners and letting agents in England have already been banned from charging fees to tenants who signed new agreements after June 1, 2019.

But the rules allowed landlords to continue charging exit fees and claiming for items such as inventories, maintenance and administration on tenancies signed before that date. That loophole was closed on Monday, when a blanket ban on all tenant fees came into effect.

If landlords do not comply with the legislation, tenants can reclaim their money through the courts and landlords will be fined £5,000 for a first offence, rising to £30,000 for further violations.

The rules on deposits also changed in June 2019, when landlords were banned from taking more than five weeks’ rent if the annual rent was less than £50,000, or six weeks if the annual rent was £50,000 or more. There are no situations in which a larger deposit can be charged, even if the tenant has pets.

Although existing deposits that exceed the cap do not have to be returned, if a new tenancy agreement is signed at any stage, any excess deposit must be returned.

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