How Will the Renters Reform Bill Affect the Student Accommodation Market in the UK?

Introduction

Renters (reform) bill has been in the talks since May 2023 and for good reasons. The Bill got its first reading in Parliament on May 17th, 2023, and since then, many implications have been projected in the student accommodation market. The Bill intends to abolish No-fault evictions, and fixed-term tenancy under Section 21, introduce annual rental increment cycles, improve the quality of rental housing and provide a robust structure to address tenant issues by involving the ombudsman. This blog briefly explains the history of the Renters (reform) Bill and how this revolutionary bill will change the student housing market in the UK.

What is the Renters Reform Bill

• In the UK there have been several renters-related legislations established since 1965. The Rent Act of 1965 set the foundation that introduced rent control measures and security of tenure for tenants, limitations on rent hikes and served as a protection against forceful evictions.
• The Rent Act 1977 was a step up from the Rent Act 1965 which reformed the rent control measures and implemented changes for a fair rent system by involving “fair rent officers” to determine the maximum rent that can be charged by the landlords considering their property’s condition and market situation.
• 8 years later, Housing Act 1985 set Assured Shorthold Tenancies (AST) as the default type of tenancy which offered landlords flexibility and easily regain possession of their rental properties. And after 3 years, The Housing Act 1988 is considered historic legislation in the UK’s rental market, as it introduced the controversial Section 21. Also, in addition to AST, this act introduced another type of tenancy called ‘Fixed Term Tenancies’. Under an AST, the initial tenancy agreement is for a fixed term, typically six or 12 months. At the end of the fixed term, the tenancy may either be renewed for another fixed term or continue on a periodic basis (month-to-month).
• Coming to 2019 the Renters Reform Bill was first proposed basis on the promise of then-Prime Minister Theresa May to scrap the no-fault Evictions under section 21 of the Rent Act 1988. According to the lawmakers, this bill intends to provide protection to renters and also achieve balance by providing more rights to landlords and tenants alike. And now in May 2023, this bill has received its first time reading in the Parliament.

Objectives of Renters Reform Bill

The Renters’ Reform Bill aims to deliver a fairer, safer, and high-quality private rented sector (PRS) system in the UK. The following are the key objectives drawn to fulfil this aim:

• Implementing the Decent Homes Standard in the PRS to significantly reduce the number of substandard rental properties.
• Strengthening landlords' ability to evict tenants for anti-disciplinary behaviour (under the Antisocial Behaviour Act 2003) or rent non-payment, ensuring a safer and more reliable rental experience under revised Section 8.
• Establishing a new ombudsman to expedite and streamline dispute resolutions, providing quicker and more cost-effective solutions for both landlords and tenants.
• Establishing a national landlord register via the new property portal, providing renters with comprehensive information necessary to make informed decisions before entering into a tenancy agreement.
• Developing a digital portal to enhance landlords' understanding of their responsibilities and to empower tenants with comprehensive information about prospective rental properties.
• Prohibiting landlords from implementing blanket bans on renting to tenants with children or pets, as well as tenants receiving housing benefits, promoting fairer access to housing for these groups.
• Ending 'Section 21' no-fault evictions, granting tenants greater security and protection against sudden and unjustified evictions.
• The Renters Reform Bill 2023 promotes pet-friendly renting by requiring landlords to reasonably consider pet requests and allowing tenants to challenge refusals. It also permits landlords to include pet insurance as a permitted payment for property damage coverage.
• Abolishing fixed-term tenancy agreements (FTTAs) to align student letting with other areas of the private rented sector, providing more flexibility and stability for student renters.
• Restricting rent increases to occur once a year, will ensure tenants have more predictable and manageable rental costs.

The End of Section 21

• According to the whitepaper issued by the UK parliament, one of the central provisions of the bill is the elimination of Section 21, commonly known as "no-fault" evictions. Landlords will no longer be able to evict tenants without a valid reason. Additionally, fixed-term tenancies will be ended and all tenants who previously had an assured tenancy or assured shorthold tenancy (AST) will transition to a unified system of periodic tenancies.
• Under the new legislation, tenants will be required to provide a minimum of two months' notice when they intend to end their tenancy. This notice period allows both tenants and landlords to plan for the future effectively.
• Landlords will have limited grounds for eviction, as specified in the legislation. They can only evict tenants in reasonable circumstances outlined in the Renters Reform Bill 2023. These provisions aim to prevent arbitrary evictions and provide greater security for tenants. Moreover, instead of Section 21, the landlords can practice their need for eviction through revised Section 8.
• It is important to note that Purpose-Built Student Accommodation (PBSA) will be exempted from these changes. However, this exemption applies only if the provider of PBSA is registered for government-approved codes. Tenancies in PBSA are governed by the Eviction Act 1977, which offers its own set of regulations.

No-Fault Evictions

• No-fault evictions, also known as Section 21 evictions, allow landlords in England and Wales to terminate assured shorthold tenancies without providing a specific reason.
• A Section 21 notice can be given at the end of a fixed-term contract, during a break clause, or as a rolling periodic tenancy.
• Landlords are not obligated to provide a reason for issuing the notice, which can be based on various factors such as inappropriate behaviour or the intention to sell the property.
• When a student receives a notice under Section 21, he/she gets a 2-month period to find another accommodation. Also, in some cases, a student can request an early move-out date. However, students may challenge the eviction notice in court. Till the resolution of the case, a student shall stay on the property and may be evicted post legal order.
• The Daily Mail has recently cited Campaigning Charity Shelter’s observation which says since the proposal of scraping section 21 in April 2019, the UK has seen 230,000 No-Fault evictions. This indicates the major turmoil in the rental sector, where landlords rushed to gain possession of their properties.

Abolishment of No-Fault Evictions

• Initially, the Rent Act 1988 was drafted to encourage landlords to put their properties in the rental market thus, providing them more power in possession of their properties under section 21. However, Section 21 has often been held responsible for student homelessness as the AST/periodic tenancies can end, and the landlord demands their property back without any reason.
• The whitepaper issued by the UK Parliament for Renters’ Reform Bill claims that the reason behind removing this clause is a step to empower renters enough to challenge the poor practices, and unfair evictions in the private rental market while providing a secured stay in the tenancy period. Due to this, the landlords can only evict the renter based on unlawful behaviour, damages to the property, or fault-based grounds and if the landlord wishes to sell their rental property.
• This will save students from homelessness as this amendment prohibits landlords from serving arbitrary eviction notices without any solid grounds.

The Revised Section 8

While No-fault evictions will be no more, the legislation does provide more defined grounds under section 8 with which the landlords can claim their property back.

Following are the aspects under which the law allows them the repossession of their property.

A. The decision to reside in the rental property

• At present, by holding section 8 as ground, landlords can issue a notice to tenants/students if they decide to use their property for their own residence. However, this does not apply if they wish to grant their rental property to their family members.
• The revised Section 8 allows the landlords to issue an eviction notice to residing tenants if they want to avail their property to their immediate family members. However, this will only be allowed if the current tenants have completed their 6 months of tenancy and received a two-month notice.

B. Putting the property up for sale

• Under the revised section 8, landlords can provide tenants with two months' notice if they wish to sell their property, however, this requires a minimum 6 months of tenancy period for the current tenants.

C. Disruptive/asocial/unlawful behaviour

• In the case of any serious unlawful, and destructive activity by the tenants, the landlords will not be required to provide 2 months’ notice and it can be reduced to 2-weeks' notice for eviction. In this case, it will be mandatory for the landlord to provide proof of nuisance which may be vetted during legal proceedings.
• Eviction-related cases addressed in court will be recorded and updated on a digitized tracking system, aiming to provide resolution and minimize delays.
• Currently, Section 8 provides landlords with the power to reinstate control of their property if the tenant does not pay their outstanding rental payment over the suggested period in their tenancy.
• However, according to Goodlord (consultation portal for rental properties), the tenants would often pay their rents and reduce their outstanding payments only to maintain a minimum threshold of the suggested period to avoid court proceedings. Due to this, landlords have to reinitiate the claim process from the beginning.
• The revised Section 8 makes the eviction on the basis of rent arrears simpler as the eviction will become absolute if the tenants have failed to pay their rent for at least two months on three separate occasions in a 3-year period.

No More Fixed-Term Tenancies?

• Section 21 initiates the legal process of ending the Assured Short-Term tenancy and it can also be issued by the landlord at the end of fixed-term tenancy or earlier, in case of a break clause to proceed with early termination.
• The Renters Reform Bill 2023 added another section 4A to the Housing Act 1988 under clause 1 and before Section 5, which amends that there will be no fixed-term tenancies and all the assured tenancies will be periodic. This has been achieved by making references to Section 21 irrelevant in part VII of the Housing Act 1996.

Consequences of Ending Fixed-Term Tenancies on the Student Housing Market

Several reputable portals have contemplated both the negative and positive consequences of ending fixed-term tenancies in the student housing industry as student rentals are not as typical as other rental types in the private rental sector (PRS).

• Students in the UK have several options for accommodation types during their academic term such as university halls of residence, purpose-built student accommodation (PBSA), and HMOs or off-street rental properties.
• Under the new bill, while PBSAs have been exempted from the no-fixed term tenancies, students in PBSA have to honour fixed-term agreements for up to 12 months by assuring the tenancy for an entire academic year but students will have limited options of moving out before the end of the tenancy term.
• HMO owners in the student housing market will have to oblige to an Assured Term agreement. These are to be followed by joint tenancies as well, so if a student under such an agreement decides to move out it would also terminate the tenancies for the remaining flatmates, leaving them with a sudden need of securing accommodation.
• HEPI also contemplates that students would have to give notice to leave their current property two months in advance. This means they may have to start looking for a new place to live during their exams or before they have finished their current year of study. It creates uncertainty and the risk of not having a place to stay for the next year.
• Student property landlords depend on a 12-month rental period for their properties. With open-ended tenancies, landlords may find their accommodations vacant in the summer break, which will lead them to list their property to professionals or other tenant types. This may limit the availability of student housing and make the market more competitive.
• A report by the House of Commons “Reforming the Private Rented Sector” observes that similar reforms have caused uncertainty in the Scottish housing market. In 2016, Scotland also scrapped fixed-term tenancies which discouraged several landlords from moving away from the student rental sector and resorting to long-term letting.
• PBSAs may also possibly become dominant in the student housing market as they will operate with traditional FTTAs. On the other hand, off-the-road student HMOs will have to adapt to new tenancy cycles. This may constitute more investments in the PBSA sector, and some HMO landlords may opt to sell their properties to PBSA management companies or turn their attention to other tenant groups.

As reported by Propertymark on the backdrop of these forecasts, Michael Gove MP, Secretary of State for Levelling Up, Housing and Communities is signalling an addition of the amendment to the current proposed Renters’ Reform Bill. This amendment promises to provide guaranteed vacant possession to landlords and re-establish the conventional yearly let model.

💡Insights

• The scrapping of FTTAs will produce the need to gain higher adaptability for HMOs in the student housing market due to the loss of the yearly let model.
• HMO owners may have to restrategize their marketing and other expenses while accurately forecasting demand for their properties and aligning it with the vacancy levels.
• PBSAs have an edge as an organized sector and are exempted from Section 21. They also get an added advantage as they tend to list their properties on aggregator platforms.
• Student HMOs can benefit from forming their partnership with student housing solutions providers like amber and listing their properties, which will help them gain reach in the global student community with the elaborate region and demand-wise analysis.

Role of the Ombudsman

To streamline the redressal mechanism for both landlords and tenants in the rental market, this bill introduces an ombudsman. The guidelines on GOV.UK states that the Ombudsman is designed to be a single redressal scheme that landlords must join. Membership of the Ombudsman is mandatory for all landlords.

• Ombudsman will address the tenants’ problems which include the landlord’s unlawful behaviour, failure to maintain standards of the property or failure to repair in a reasonable timeframe.
• Ombudsman is also granted powers to ask the landlord to issue an apology, provide information and pay compensations up to £25,000. Which acts as extended and necessary support to vulnerable renters.
• Through the Ombudsman, the Bill intends to bring reforms to resolve systemic issues and provide education and feedback to landlords/members and consumers/tenants.
• The decision of the Ombudsman will act as a mandate and to be followed by landlords. Failure to comply with the Ombudsman’s decision will result in the termination of the landlord’s membership. Post membership termination, if the landlord still continues to be in the rental market to let their properties, then they will be subjected to enforcement action from their local council.

Other Key Reforms

• Once-in-a-year rent increase: Under Section 13, the bill intends to restrict rent increases to once a year to provide student tenants with more predictable and manageable rental costs. The tenants shall be served with two months’ advance notice for the new rent. The tenants can either accept or challenge the proposed hike at the tribunal. This will be particularly beneficial for students who often have fixed budgets and need to plan their expenses carefully.
• Obligation for better accommodation: The Renter's Reform Bill, implemented in three stages, includes provisions requiring landlords to adhere to new minimum standards for property maintenance and repairs. This means that landlords will have to carry out necessary repairs within a specified time frame and ensure that essential services like water, heating, and electricity are maintained to a reasonable standard. The primary goal of these requirements is to enhance living conditions in private rented homes.
• Pet-friendly policy: The Bill promotes pet-friendly renting by requiring landlords to reasonably consider pet requests from student tenants. This is significant for students who may want to have a pet companion during their time at university. The Bill allows tenants to challenge refusals providing them with a fair opportunity to have the companionship of their pets. Additionally, permitting landlords to include pet insurance for property damage coverage can resolve the landlord’s concerns about pet-related damages.
• Enhanced transparency through the national landlord register: The establishment of a national landlord register via the new property portal will provide student tenants with the detailed information necessary to make informed decisions before entering into a tenancy agreement. This includes access to details about the landlord's track record, any previous complaints, and compliance with regulations to increase transparency between the landlord and student tenants.
• Streamlined redressal through the digital portal: The proposed digital portal in the Bill will enhance landlords' understanding of their responsibilities and obligations. The portal can provide them with accessible information, guidelines, and resources to ensure they comply with regulations and maintain high standards of housing. Simultaneously, the portal will empower student tenants by providing them with comprehensive information about prospective rental properties, enabling them to make informed decisions about their accommodation choices and understand their rights and responsibilities as tenants.

The Process and Timeline for Renter’s Reform Bill to Become a Law:

Since its publication and first reading in May 2023, the potential timeline for implementation of the Renters Reform Bill 2023 has been updated. The bill will be implemented in 3 Stages.

Stage 1:

• In May 2023, the renters’ reform bill summary was introduced in the House of Commons.
• The bill undergoes two readings in the House of Commons. During the second reading, a government minister presents and defends the provisions outlined in the bill, while the opposition registers their response.
• Following the second reading, the bill is open for discussion and potential amendments by other members of the House of Commons.
• The bill proceeds to its third reading in the House of Commons.

Stage 2:

• After successfully passing the third reading in the House of Commons, the bill moves to the House of Lords for further consideration.
• In the House of Lords, the bill undergoes three readings, a thorough debate, and a voting process to gain approval from the members of the House of Lords.

Stage 3:

• Upon receiving enough votes in favor from the House of Lords, the bill is presented for Royal Assent.
• Representatives of the Crown review the bill and, upon agreement, formally approve it as an act, paving the way for its implementation.

Once the bill receives Royal Assent, it becomes law and can be implemented to bring about the intended reforms for renters.

Conclusion

The Renters Reform Bill 2023 aims to make significant changes to the student housing market in the UK. It seeks to abolish No-Fault Evictions, implement annual rental increment cycles, improve rental housing quality, and establish an ombudsman to address tenant issues. The bill eliminates Section 21, which allows landlords to evict tenants without reason and introduces a revised Section 8 with limited grounds for eviction. There are concerns related to the banning of fixed-term tenancies and to be replaced with periodic tenancies. The Purpose-Built Student Accommodation (PBSA) can still provide the FTTAs whereas landlords in other property types may shy away from the student rental market due to the uncertainty of the tenancy period. The bill also promotes pet-friendly renting, prohibits blanket bans on tenants, and restricts rent increases to once a year. These reforms aim to provide greater security and protection for tenants while ensuring transparency and fairness in the rental market.

‍