Should the Government Refund Student Rents?

Miranda Challiner:

Student Unions across England called for the Government to intervene in the student renting market. In response, the Government announced that they are providing an additional £50 million of support for university students impacted by Covid-19. There is now a total of £70 million of Government support being distributed through universities.

A Brief Update

The APPG for Students (all-party parliamentary group) have criticised the Government for "avoiding responsibility" and "abandoning" students. Paul Blomfield, the head of the APPG for Students commented on the ongoing situation:

"Students have not had the financial support available to others but will pay back the national debt from the pandemic throughout their working lives. We must give them financial help now and fund the extra provision they will need to make up for lost learning"

An inquiry, led by the APPG for Students, heard from the National Union of Students, student unions and hundreds of students across the UK. The APPG for Students report recommends increased financial assistance through the emergency hardship fund and rent refunds for unused accommodation due to lockdown.

The Government has since acted on the report, increasing the hardship fund by £50 million but have chosen not to refund rents. Many landlords and students argue the Government’s actions do not go far enough and call for more assistance.

Mortgage Payment Holidays

Landlords can apply for mortgage payment holidays up to 31st March 2021. The holiday can last six months and you are only allowed to apply for one. For more detail on the ins and outs of the mortgage holiday, check out this article by the Money Advice Service.

The scheme intends to help landlords help their tenants if they are financially distressed. However, there is no obligation for landlords to pass on these savings. Many have called for the Government to require landlords to self-certify they are passing on the savings. Others, including Mary-Anne Bowring, the group managing director at Ringley (a property management company who manage thousands of properties), called for transparency by allowing tenants see if their landlord has benefited from a mortgage holiday. Ms Bowring also suggested this should work both ways, calling for tenants to be required to prove they were in financial hardship when asking for rent reductions or deferral.

When the Government announced the scheme, it said that it would not affect credit scores. Whilst this was a good idea in principle, some mortgage providers have circumvented this rule by now asking landlords if they have ever taken a mortgage payment holiday and rejecting applications if they have. Clearly, further work is needed around this policy. One option is banning mortgage providers from asking the question. However, this could pose a whole host of alternative issues and again could be easily circumvented by lenders simply looking at a landlord’s repayment history. The BBC has written an article on how mortgage holidays may affect your ability to borrow, check it out here.

It was a good idea in principle but many are left asking the question if it can be called a success.

Rent Reductions

The NRLA (National Residential Landlords Association) found that 20.1% of students have requested rent reductions and a further 19.4% asked to vacate their property early. With the latest closure of Universities, it is easy to understand why. Students are stuck with accommodation they are not allowed to use.

However, it is always crucial to consider both sides of the story. Many landlords rely on their rental income to live and therefore, cannot afford to forego a year or two of rent. According to the NRLA, 61.1% of landlords have granted rent reductions and 39.4% have granted rent holidays. However, it is unclear who was asked in this study. If the study was limited to NRLA members, these statistics are expected as landlords who pay for a membership to an association are more likely to be good considerate landlords. What we can determine is good landlords are trying their best to balance student’s circumstances with their own financial needs.

We spoke to two landlords in York who own seven properties. They explained that being a landlord is their full-time job. They currently have three properties unrented and offered 25% rent reductions on the other four. Overall, they’ve seen a 50% reduction in their income. They were advised to not take a mortgage holiday as it may affect their ability to borrow in the future so they still have their mortgage payments to cover. Whilst they would like to offer more back to students, they are unable to as they have to cover mortgage costs as well as their living expenses.

Government Intervention

As we discussed above, the Government has announced an additional £50million of support. A total of approximately 1.2 million students rent some form of accommodation each year, 1.8 million across two academic years. The total £70m support means students will receive £38.89 each. The support will be targeted to those most in need so many will receive more but some will receive nothing. Bursaries vary at each university and students should check their university website for availability, eligibility and application deadlines.

Many are calling for the Government to provide more support and cover all rent for students during the periods when universities are closed. This is a total of approximately nine months (assuming universities reopen at the end of March). Each year students spend around £6 billion on rent. The Government support package would need to be around £4.5 billion to cover student rent. Across the 1.8 million student renters that have experienced university closures, the support would amount to £2,500 per student or £9.92 per student per day.

The Government had spent £73 billion as of November 2020 on the Furlough Scheme covering a cumulative total of 9.6 million jobs. The support amounts to £7605 per worker or £36.38 per worker per day. When comparing this to the cost per student for rent refunds, you can understand why students are frustrated by the Government’s current position.

One of the most pressing problems that the Government should consider is the long term cost to the economy. Students who are caught in a rent trap and mounting debt may find it impossible to continue with university. The average university graduate earns £100,000 more than a non-graduate over their lifetime (gov.uk). If we assume that 33% of this is spent on exports, 8% is saved and 20% is taxed. The rest, 39%, is spent on UK produce. Using the multiplier effect, we can calculate the additional growth to the UK economy is approximately £163,934 per student.

If we take the 1.8 million student renters, the total additional economic growth they will generate will be approximately £295 billion. It is unclear, due to a lack of statistics available, what impact rent arrears will have on this figure. However, there would need to be a fall of greater than £4.5 billion for the Government to consider acting. If each student renter saw a fall in expected lifetime earnings of around £2,000 the cost to the Government could be justified.

In November a study by LSE said that rent arrears could triple in 2021. If we assume students will follow a similar pattern, the number of students in arrears will be around 51,000. The support needed to cover these students totals around £50 million. The Government’s £75 million hardship fund covers these students and therefore, some are asking the question if students should be given more. However, a common problem with these calculations is that they do not necessarily lead to a 'fair' outcome. Should students be expected to pay for accommodation they are not allowed to use just because they can afford it?

Final Thoughts

From what we’ve heard, most landlords have tried their best to accommodate students but are unable to do more as they have their own finances to consider. For many small landlords, the only way they can help students more is with the Government’s help. However, it appears that both sides believe the Government’s hardship fund does not go nearly far enough.

One reason the Government has yet to shift its position on refunding student rent could be the lack of supporting facts. The NUS is fighting hard on students behalf and has achieved big wins but the language they use often does not present the strongest argument. The NUS has access to vast amounts of data on students’ current situations. This data could be used to build a strong economic case around why students should be given refunds, a case the Government can not ignore. The best way for students to receive refunds is to prove the cost to the economy will be greater than the cost to the Government today.

Has your landlord reduced your rent? Do you think the Government needs to do more? Let us know in the comments below!