Student rents to surge by hundreds under Labour, experts warn

Students face paying an extra £600 per year in rent under Labour as landlords look to bill them for rental insurance, experts have warned.

Landlords are said to be concerned about student tenants building up arrears thanks to changes brought in by the Government’s new Renters’ Rights Bill.

The legislation will ban tenants from paying more than one month’s rent upfront, despite the fact the majority of students (67pc) pay their rent termly – in line with when they receive their maintenance loans.

In Scotland, students’ maintenance loans are already paid on a monthly basis. But in Wales and England, they are still paid each term.

It has sparked fears tenants will struggle to budget their loans and make the monthly payments – forcing many landlords to take out rental insurance to cover them in case of a default.

Tom Walker, co-founder of StuRents, said landlords taking out insurance could be forced to increase rents by between 5pc and 8pc in the next academic year.

The average student rent outside London is currently £150.88 per person per week, according to StuRents. An 8pc rise would represent a £628 annual increase.

Mr Walker said: “The bill is completely rewriting how students pay their rent, and it undermines the fact students use their maintenance loans to pay it. Unless the Government changes the maintenance loan system to be paid on a monthly basis, students will really struggle to budget.

“We’ll probably see arrears rates climb.”

Mr Walker added he had spoken to several large student accommodation providers as well as estate agents who represent smaller landlords interested in setting up rent insurance policies since the bill was published last week.

Rent insurance, or a “rent guarantor”, is a product offered by companies which will pay out money quickly to a landlord if a tenant, or tenants, fail to pay rent.

Some products will also cover the eviction of defaulting tenants – including the court costs involved.

If a landlord with a four-bed student house were to take out a rent insurance policy with Rent Guarantor, a company which offers rent insurance, it would cost them £1,760 a year according to the firm’s online quote service.

Student landlords, like other private landlords, will also be affected by a major shake-up to eviction laws.

The Renters’ Rights Bill will ban Section 21, otherwise known as “no-fault” evictions, for all tenancies from next summer. It will also extend the period of time before a landlord can seek court action to evict a non-paying tenant, from two months to three.

Landlords will then need to give four weeks notice to non-paying tenants, instead of the current two, equating to at least four months of unpaid rent if tenants fall behind on payments.

Timothy Douglas, of estate agency trade body Propertymark, said: “The Government has to understand that a cost will come with that. You will see more landlords and agents using rent guarantee insurance, especially now rent arrears can go on for longer.”

A spokesman for the Ministry of Housing, Communities and Local Government said: “The removal of fixed term tenancies will mean students can end their tenancy by giving two months’ notice. This will end the injustice of people being trapped paying rent for substandard properties, or unable to respond to their changing circumstances.”