What will September bring for student landlords?

Come September, the university landscape is going to look very different, with many campuses across the country deciding to take their courses online.

Social distancing measures, travel restrictions and the possibility of local lockdowns, not to mention the fact that many courses don’t plan to return at all until 2021, spell big changes for universities. There are currently 13 universities in the UK at serious risk of bankruptcy, and with no government bailout on the horizon, the Institute for Fiscal Studies (IFS) estimates total long-run losses of £11 billion.

Across the board, there is going to be a drastically reduced number of students on a national and international level and that means not only that universities will be struggling financially, but so too, potentially, will student landlords.

This is all due, of course, to the COVID-19 pandemic, which has already caused major problems for private landlords across the country. But whilst there have been minor measures put in place to help landlords, such as the stamp duty holiday and the green homes grant, these measures are unlikely to affect the student landlord trade. Because if there are no students to fill those vacant properties then there is a fundamental problem that needs to be addressed.

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When September starts

While a few residences and private shared accommodations have remained open throughout the pandemic, most have not. With many student landlords forced to release students from their contracts several months early, vacancy rates have soared and rents have plummeted.

It’s easy to see why. Accommodation costs are of paramount concern to students, particularly in a climate where thousands of part-time workers have been made jobless due to the pandemic’s stranglehold on the hospitality sector. Then there’s the more personal factor that, in times of crisis, many would prefer to be at home with their loved ones rather than isolated with relative strangers.

This March, many students fled their accommodation and returned home to wait out the pandemic. We now face a reality where a significant amount of these students won’t be returning and there are unlikely to be any other new students stepping up to take their place, particularly with some institutions contemplating pushing back the start of the academic year to January 2021.

As far as official advice goes for students, it would appear that extreme caution is being advised and this is not great news for landlords.

Claire Sosienski-Smith from the National Union of Students (NUS), said:

“We would recommend that students think carefully before signing any binding contracts or agreements for next year, especially in the case of rental contracts.”

With such pessimism polluting the waters, student landlords will undoubtedly be fighting an uphill battle in the months ahead.

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Accentuating the alternative

Despite the pervasive negativity surrounding the subject, is it really all doom and gloom or might landlords simply have to temper their expectations a little? A poll by UCAS found that nine out of every ten undergraduate applicants still intend on heading to university later this year and The British Council estimates that international student enrolment could be down this year but only by 12 per cent. Not an insignificant number, of course, but not catastrophic either. That being said, Unite Students estimates a loss of between 16 per cent and 20 per cent for the 2019/2020 academic year so, as ever, it depends on who you ask.

Although things might be looking bleak for private student landlords, things are looking even worse for the purpose-built student accommodation sector (PBSA), which wasn’t exactly in the best shape pre-COVID.

Many owners and operators of these buildings have allowed students to break their tenancy contracts and even claim rebates in situations where they have paid upfront, and the next 12 months don’t look any brighter.

Whilst these specialised accommodation blocks can only be used for one purpose, however, the private properties owned and operated by student landlords are flexible enough for a Plan B. Indeed, the large overheads and promised dividends of ‘on-campus’ accommodation could actually be undercut by those smaller landlords that have the gumption to market themselves as the ‘alternative’ to the university’s soulless concrete blocks.

Still, even with the enquiries into PBSA down, Knight Frank’s 2020 Student Accommodation Survey found that 75 per cent of students who lived in private PBSA would recommend their accommodation to new first-year students.

So, if private renters want to stand out from their ‘corporate’ competitors they might want to consider doubling down on what makes shared student housing so special – the independence, the individuality and, of course, the cost!

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Finding a new purpose

In a more drastic move to combat the decline in demand and bottom line, some are suggesting that student landlords should be expanding their horizons by repurposing their accommodation. By marketing their properties towards young professionals and taking some cues from the serviced apartment or build to rent models, landlords could perhaps transform their shared properties into lucrative single-occupancy apartments, or a great city base for UK ‘staycations’. Some professionals working from home may want a quiet space to concentrate for the day away from their families. 

This will, of course, depend largely on site location and if work is required it’s more than likely that local planning authorities would be sympathetic to the cause. After all, it’s in their best interests to avoid empty buildings wherever possible. Landlords will also need to discuss a change in use with their insurer. 

Overall, student landlords can weather this storm by being realistic, pragmatic and creative. 

Renting to students can be a complex undertaking at any time. Check out our full landlord guide for everything you need to know. 

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