Changes announced to the Renters’ Rights Bill on upfront rent

As it stands plenty of landlords demand six months or in some cases a year’s rent from some students, especially if they can’t find a UK-based guarantor.

Now a government amendment will mean that landlords will only be able to ask tenants to pay one month’s rent upfront, alongside the usual deposit of up to six weeks’ rent allowed under the Tenant Fees Act 2019.

The Government has also introduced new breaches in the Tenant Fees Act where the landlord or their letting agent invites, encourages or accepts offers of payments of rent above the permitted amount before the tenancy starts – including any payments to third parties.

Secretary of State for Housing Angela Rayner says this will provide enough financial assurance to landlords while stamping out “unscrupulous” property owners that demand “outrageous upfront costs” and discriminate against lower earners.

Landlords are less supportive.

The National Residential Landlords Association (NRLA) says that banning landlords from asking for rent upfront will:

…cut off any assurance responsible landlords might seek when renting homes to those who cannot easily demonstrate their ability to sustain tenancies and pay their rents.

Norris argued that landlords only tend to ask for it where a prospective tenant is unable to meet regular referencing requirements in order to mitigate the risk of default:

Commonly this happens when a tenant is new to the country and does not have a track record in the UK, such as international students, or where they are unable to provide sufficient evidence of income to sustain the tenancy. This includes applicants that meet the minimum income requirements for a tenancy but are employed on a short-term or variable basis with an income that fluctuates accordingly.

Of course coupled with the end of fixed term tenancies and the right for tenants to exit a tenancy on two months notice, the NRLA is dancing on the head of a pin a little – landlords were obviously very keen to get a guarantor for a year’s worth of rent, but under the other clauses in the Bill, guarantees (or a formal guarantor) don’t really matter as much.

That said, where a guarantor is sought, the government has also agreed to not require the guarantor to stump up the now more limited two months’ worth if the tenant dies. What we don’t have is what plenty of other European countries have which is the right to not pay anything (or get a refund on that first months’s rent) if you’re no longer a student.

The NRLA called on ministers to “provide clarity” on how renters will “demonstrate their ability to afford” rent in the future.

The one month’s rent thing will be a source of disruption for those private landlords who rent to students by taking payments per term to align with SFE/SLC student loan drops – that practice will be banned, which is why students are able to access student finance monthly in Scotland. That kind of joined-up government is not in evidence here.

On the affordability issues, in theory an international student just has to say they have their visa – the regime around which is supposed to assess whether they have enough money. But notwithstanding stories about the “creative” ways that some students (and their agents) hit that level of cash in the bank on a given day, another bit of government not joined-up is that the amount they’re told to have will only be the maximum English maintenance loan – which we know isn’t enough.

The fear is that in tighter markets, student landlords will just discriminate on the basis of nationality, or decide not to rent to students at all – although the evidence seems to be that the quality they get away with providing and the yields generated from student rents makes a lot of the lobbying sound hollow.

Elsewhere in the Bill, the new “student ground” – which will allow landlords to evict students over the summer – looks like it will be amended with an additional restriction put in, that the tenancy must be agreed less than six months before the start date of the tenancy.

That will effectively ban student landlords from agreeing tenancies more than six months from the move in date – designed to stop locking students in too early – but could create some interesting cliff edges in March when housing suddenly becomes available.

And March remains a question. On the forums, landlords are spotting that students on a September 1st tenancy start “could” issue their notice to quit a tenancy in March, so they don’t have to pay rent if they’re not there in May, June, July and August.

The problem is that some landlords will just get around that by shifting their start dates to June 1st – which would mean those students still paying for dead months, and the housing scramble shifting to December instead.

None of the above takes into account those students who very much need to be around over the summer who have longer end dates (surely DfE has been talking to MHCLG about all the students that SLC issues longer loans to) and those who have academic years that don’t start in September.

And none of the above impacts halls, either university or private-run – the two tiers of rights, especially on being able to exit on two months’ notice, will likely mean that students will scramble even harder to get into houses rather than halls as an insurance against having to stump up for a full year of fixed-term contract if something goes wrong.

That extra pressure on private housing may well be the sort of consequence that the government is not intending, but really ought to be able to at least predict.

There’s plenty of road to go here – the Bill will hit the Lords next, where we might expect a little more scrutiny on the practical implications of the plans. Universities and SUs will be wise to start scenario-planning the impacts with students ahead of Lords committee stage.