This article is more than 1 year old

We cap costs for social renters. Why not students too?

If we think things are bad this year, imagine how expensive student rent in halls will get next year if it goes up by RPI. Rory Hughes has some helpful suggestions.
This article is more than 1 year old

Rory Hughes is a housing policy and campaigns consultant

Rents in Purpose-Built Student Accommodation (PBSA) are potentially set to rocket next year, exacerbating the cost of living crisis and further embedding economy-wide inflation.

NUS-UNIPOL research has consistently shown how PBSA landlords tend to use RPI inflation as a floor upon which to base their even higher annual rent rises. In many off-balance sheet financing deals for on-campus accommodation, RPI is stated as the increase that will apply. And plenty of universities offer “guaranteed” places in nominated private PBSA that are all likely to be yanking up rents.

We are highly likely to see rent rises of between 10-20% heading students’ way.

If so, could government-mandated rent caps be the answer? News this week that strict rent caps are being proposed by the Westminster government in the world of social housing suggests…yes.

Every day’s a school day

Many people don’t realise – but rent caps do actually already exist in England, just only in the social housing sector.

The government, via directions to the Regulator of Social Housing, periodically sets a “rent formula” which acts as a ceiling by which social housing rents can rise each year. Since 2019, this has capped social housing rent increases at CPI+1%.

In the context of current inflation, this could have meant rent rises of 11%+ for social housing tenants next year. Government has recognised that this would push many of the poorest tenants in the country into further poverty and require the government to spend huge additional monies on housing benefit (which more than half of social housing tenants already receive).

So, DLUHC have just published a consultation on further capping social housing rent rises at 3%, 5% or 7% – with their preferred option to limit increases to 5%, about half of projected inflation.

Whilst such protection for social housing tenants is necessary there is no doubt that it will leave social housing landlords, who are genuinely valuable social institutions and the foremost solution to the UK housing crisis, facing huge real terms cut in their budgets.

Social landlords face rocketing inflation costs across all of their essential operations. Slashing the budgets they use to build desperately needed new social homes, carry out essential maintenance and repairs and deliver rapid decarbonisation retrofit projects that are essential for the UK to reach net zero is a serious trade off.

This story tells us that:

  1. Government is happy to cushion these low income households from whopping rent increases
  2. It is also keen to protect the taxpayer from covering rent increases via inflated rent subsidies
  3. They are happy to take action despite the heavy impact on the budgets of a valuable social housing sector
  4. Rent caps are a suitable mechanism with which to do so.

This all begs the question then, why would government be okay with the prospect of forthcoming uncapped, inflation-pegged rent increases in PBSA?

Students are people too

Higher education students are clearly also a demographic on low incomes and they will be hit hard by any increases.

PBSA clearly is a distinct housing sector, with similarities to that of supported social housing, indeed some is even run by charities (including universities) and housing associations.

Student maintenance loans (which are ultimately mostly taxpayer funded debt) will inevitably be further swallowed up by PBSA landlords through any whopping increases in rents.

And PBSA is mostly a vastly profitable business, so profits would be the main thing squeezed by any rent cap, not the valuable budgets of social landlords. This should make the necessary trade offs of caps even less of a consideration to the government.

Given all of this, is it time then that we discussed and lobbied for not only an emergency rent cap aligned with social housing in the next year, but the creation of a permanent rent-setting formula for PBSA, set by government and closely linked to student finance and changes in living standards?

In the recent past, government has been even more radical with the rent formula. In the noughties, the government mandated “rent convergence” to force previously disjointed housing association and local authority rents into line with each other. Could this be a model to bring private sector PBSA rents into line with cheaper university stock?

And, in the mid 2010s, the government mandated all social housing landlords cut rents by 1% every year for several years – perhaps this could help the long-term PBSA affordability crisis?

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