We cap rents now for low income families. Why not students?

The social housing sector is regulated in the interest of its tenants - Rory Hughes asks why there's no equivalent for students

Rory Hughes is a housing policy and campaigns consultant

Rents in student accommodation are growing, and as they grow, they both exacerbate the cost of living crisis and slow attempts to tackle economy-wide inflation.

NUS-Unipol research has consistently shown that Purpose-Built Student Accommodation (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.

So as rent rises continue, could government-mandated rent caps be the answer?

Wales has been consulting, while most in England argue against, and there are loud voices in Scotland arguing that its temporary rent caps (in the PRS but not in PBSA) have been causing supply problems.

But there is one large sector where strict rent caps have been imposed by the Westminster government.

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. From 2019 it has been capping rent increases.

In the context of inflation, without those caps we could have seen rent rises of 11%+ for social housing tenants last year alone. But government 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 having imposed CPI+1% caps during Covid, last year DLUHC consulted on further capping social housing rent rises to about half of projected inflation.

Whilst such protection for social housing tenants is necessary there is no doubt that it is leaving some 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.

But more broadly, this story tells us that:

  1. Government is happy to cushion some 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. It is 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 student housing?

Students are people too

The social housing sector – with better regulation over safety and standards – pretty much exists exists to support low-income households, an unregulated market wouldn’t work and because increases in rent impact the taxpayer as well as the tenant.

Higher education students are clearly also a vulnerable group of tenants and a demographic on low incomes that is being 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) are being further swallowed up by PBSA landlords through large 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 to cut rents by 1% every year for several years – perhaps this could help the long-term PBSA affordability crisis?

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