HMO Room Rents - how do you break down rental costs or dont you bother ?

[Berlingogirl]

I have a HMO for working people only but one lost her job. The benefits people wanted a breakdown of the rent. I asked the benefits dept how they calculated unemployment benefits; how much was a person expected to spend on gas for cooking, food, clothes, etc. But they couldn't tell me.

I tried to find out from the internet but couldn't find the info.

From a starting figure of LHA I added 1/5th of the costs of all the bills including cleaning and gardening services, a toilet roll, cleaning products, a bit more for heating etc and came up with £95.80 per week.

This figure is very close to the YMCA rent per week but quite a bit higher than I actually charge per week.

[mind the gap]

Student application numbers are actually falling - http://www.wsws.org/articles/2012/se...univ-s06.shtml This is going to get worse, costs of a degree are spiralling out of control and it is ending up that people will be so much in debt they will not be guaranteed anything from achieving a degree.

More wild generalisations - not to mention exaggeration! First, tuition charges have risen but students are only required to repay their loans once they have graduated and once they are earning in excess of £21k p.a. They are not 'spiralling out of control'.

International students may help but depending on immigration as the trend is to tighten and student visa's have had a bad press over the last 2 years, very bad.

There was a dip in UK student applications for this year because many of the students who would have gone this year after a gap year, went in 2011 instead, to avoid the rise in tuition fees. Because youth unemployment is so high, I predict that numbers going into HE will hold up until the economy recovers. And it was just London Metropolitan Uni which a bad press. International students (mainly form India and China) will continue to come here in droves because British HE is still perceived as amongst the best.

This is not a generalisation, what is going to happen in my opinion is that this market is going to become very very tricky. An excellent point by midlandslandlord about the price difference but what I am seeing is these large residences being built to the point of over supply, I have also noticed prices in these coming down as the competition gets tough.

What - in all university cites and towns? And your evidence is?

Most student prefer to be in these places with better security, all their friends, new buildings etc..

No! They don't! Ask them! (I have). They put up with them in the first year because it's the most convenient and sociable way to make friends quickly. By the end of the first year they've had enough of them and would rather be in a real house or flat, at two thirds the rent.

These prices are already dropping and will continue to do so, these companies are very rich and another important factor is that they are purpose built, very very important. What else can they do? They will reduce and reduce until they let them as they can not start housing 5 people families.

So...if students would prefer to be in this kind of tower block, why (by your own admission) are they half empty and having to reduce their prices?

From my experience I have seen halls that were 100% let running this year at 50%. This hall was owned by a housing association with tens of millions at its disposal, please tell me what they will do? reduce, reduce, push. Do not try and compete against these big guns, you are silly to do so. If you can not see it coming look again, its time to leave this market.

I have every confidence that what I provide beats the big guns hands down! Please don't tell me to get out of a market which I clearly know far better than you do.

Again an excellent point about HMO's being reduced by councils, the problem I see with this in many areas as there is already an over supply of HMO's. Once a lot of the Eastern Europeans started to leave the UK there became more HMO's than people that wanted to live in them.

In some cities there is an over supply of grotty HMOs - more fool the LLs who fail to upgrade them. They will be left with expensive voids, I agree. Students are becoming more demanding by the year and good for them. It is also true that some councils are curbing the development of new HMOs and rightly so. However that means that existing HMOs will be even more in demand as there will be fewer of them.

Universities are pushing students into these halls, big companies are over supplying them, please take a look at where this is heading and have a back up plan as there costs will come down, basic fundamentals, over supply

They are only 'pushing' students into them if the Uni has a financial interest in them - and from what I've seen, they tend to fill them largely with international students who struggle to find private rented accommodation, either because they have no UK based guarantor, or because they don't know enough people before they arrive to be able to commit to a privately rented house or flat.

[hech123]

More wild generalisations - not to mention exaggeration! First, tuition charges have risen but students are only required to repay their loans once they have graduated and once they are earning in excess of £21k p.a. They are not 'spiralling out of control'.

Everyone will repay, its called inflation, £21k a year will be nothing in 20 years. student numbers are falling and becoming a student is less desirable, take into account accomodation, food, fees, books etc. etc... And it is hardly even viable, students will be hitting their mid 40's before paying off debt.

There was a dip in UK student applications for this year because many of the students who would have gone this year after a gap year, went in 2011 instead, to avoid the rise in tuition fees. Because youth unemployment is so high, I predict that numbers going into HE will hold up until the economy recovers. And it was just London Metropolitan Uni which a bad press. International students (mainly form India and China) will continue to come here in droves because British HE is still perceived as amongst the best.

You over estimate Britain, you can get degree's all over the world, have a look at how much China is investing into there Degree system, the figures are mind boggling, these figures will eventually dip even if they are static now.


What - in all university cites and towns? And your evidence is?

No only in some towns I operate in, I use what is called common sense which is what these compaines will also use, if they are 50% full at £90 a week is it better to be 100% full at £65 a week?????

No! They don't! Ask them! (I have). They put up with them in the first year because it's the most convenient and sociable way to make friends quickly. By the end of the first year they've had enough of them and would rather be in a real house or flat, at two thirds the rent.

Most students I know and have spoken to prefer this type of accomodation, if yours was better then why are you talking so much about how you are cheaper? They use you because you are cheap, as you said.


So...if students would prefer to be in this kind of tower block, why (by your own admission) are they half empty and having to reduce their prices?

Erm because this year they were still over priced but common sense tells you what will happen, most big investors I speak to can see this market as a bit of a bubble.

I have every confidence that what I provide beats the big guns hands down! Please don't tell me to get out of a market which I clearly know far better than you do.

Do not take it personally, many landlords will still do well, hopefully yourself included. You sound like you know what you are doing, I am being general about a market, if you look at the facts you would agree this is not a market to enter into and has a lot of uncertainty around it. That said it may recover, a lot can happen but I really do not like what I can see. It reminds me of when the pension funds took over commercial market.

In some cities there is an over supply of grotty HMOs - more fool the LLs who fail to upgrade them. They will be left with expensive voids, I agree. Students are becoming more demanding by the year and good for them. It is also true that some councils are curbing the development of new HMOs and rightly so. However that means that existing HMOs will be even more in demand as there will be fewer of them.

Demand has fallen and I do not see it increasing until populations increase, more medium term. Demand will remain static or fall in HMO's - Europeans leaving and students being offered other accomodation. Add to this that landlords in general are reducing prices, many students can share a house between 2 people rather than living in a HMO which no matter how good it may be is still an undesirable place to live.

They are only 'pushing' students into them if the Uni has a financial interest in them - and from what I've seen, they tend to fill them largely with international students who struggle to find private rented accommodation, either because they have no UK based guarantor, or because they don't know enough people before they arrive to be able to commit to a privately rented house or flat.

I am only saying what I see. I might be wrong but throughout my career I have mostly got it right.

[hech123]

Darn I dont know how to reply like you did, the quotation thing didnt work like yours

[midlandslandlord]

Darn I dont know how to reply like you did, the quotation thing didnt work like yours

put in [ QUOTE ] and [ /QUOTE ] minus the spaces.

I see the market rebounding to an extent next year after the rush to get in before fees.

My numbers say that student houses can compete toe to toe on facilities offered by the new halls in their 'standard enhanced" rooms, but not with ensuites and studio flats, except for perhaps ensuites, gyms, on site security and cafeterias.

I can perhaps see that marginal student private HMOs on converted houses may suffer - or be changed over to professionals and singles - but it remains that some students want to live in houses.

I don't see the corporates being able to offer rent reductions of 30-40% over current rents - they have large financial costs to pay, even in the midst of a financial bloodbath, which is what they would need to do.

Unless Councils find ways of manipulating the system, rigging the market, or applying monstrous targeted taxation rates to privates to help them, or Universities start making it a condition of offers that students live in Uni supplied accommodation for the whole of a course.

Student accommodation is being turned into a cash-cow on top of Uni fees as we all know, with active connivance from some Councils (all that luvverly extra Council Tax and satisfied 'group areas' campaigners with votes), and students will not like it.

See a couple of pieces from Phlash and a student magazine relating to Nottingham which has perhaps one of the more aggressive Councils.

http://www.comfortlettings.co.uk/blo...n-for-students

and
http://www.impactnottingham.com/2012...ive-in-lenton/

Bloodbath coming - perhaps.

But who's blood?

I wonder whether Housing Associations or ALMOs will start using their subsidies to offer accommodation to students.

And don't forget the politics-before-tenants professional landlord-haters, who are usually shaded out by people more interested in reality. They could reappear with influence. That's probably OT, though.

ML

[mind the gap]

Student accommodation is being turned into a cash-cow on top of Uni fees as we all know, with active connivance from some Councils (all that luvverly extra Council Tax and satisfied 'group areas' campaigners with votes), and students will not like it.



ML

What evidence do you have for that?

[midlandslandlord]

What evidence do you have for that?

Which bit exactly are you asking for evidence for, MTG?

Here's a little evidence:

The latest UNIPOL "purpose built student accommodation" report shows that Unis have wonked up levels of cheaper room rents (ie non-ensuite self-catering) in Uni-owned accommodation in purpose built accommodation to catch up with private providers.

Excerpt:

(Remember this is about purpose built accommodation - ie uni owned and privately owned halls and a few houses).

"Overall, average weekly rent has gone up by 25 per
cent in the three years since the last survey. In 2009-
10 it stood at £98.99 and by 2012-13 it has reached
£123.96. This steep rise was heavily loaded into the first
two of these years (23 per cent). The increase exceeds
inflation substantially and the economic impact on
students is compounded by no parallel rises in levels of
available financial support."

and within that it is driven by institutions:

"One of the most significant findings in the latest survey
is the rapid rent increases which institutions have
been imposing for provision traditionally located at the
cheaper end of the spectrum – non-ensuite self-catered
single rooms. This type of accommodation as provided
by education institutions was £6.73 a week cheaper
than the private sector in 2009-10, but by 2011-12 the
differential had shrunk to only £1.23 a week. Rooms
let through nomination arrangements were actually
three pence a week cheaper than those rented from an
institution.

A similar trend is evident for ensuite self-catered rooms,
the most common provision type. The cost differential
between education institutions and private providers
has narrowed. In 2009-10 renting from an education
institution was on average £2.86 a week cheaper than
renting from a private provider. By 2011-12, however,
education institutions were actually £0.48 a week more
expensive than private providers and rooms let through
nomination arrangements were actually cheaper than
rooms offered directly by the education institution (by
£2.82 a week)."

Report here. Well worth a read. My quotes are from the Exec Summary.
http://www.unipol.org.uk/Media/PDF/A...20V6%20WEB.pdf

In the accommodation we have under contract to a local uni the increases have been running well above inflation for years - the % of the total rent taken by the Uni has jumped by about 10% over a few years. I won't post exact percentages, but by taking it out of Uni management we would receive about £1000 more per student after costs *after* we have cut the rent by more than 10% from current levels, before the increase the Uni would add next year.

The piece by Phlash linked above has some more detail for Nottingham.

An excerpt from the Nottingham Housing Plan:

"Elsewhere in this plan, the city’s desire to ensure that communities are balanced is emphasised. This is particularly the case in respect of the student population, which in some parts of the city is so high, and the proliferation of houses in multiple occupation so great that communities are, or are in danger of becoming wholly unbalanced. In order to promote and maintain balance, Nottingham wants to encourage more purpose-built student accommodation. Supply for such accommodation is not currently meeting demand, and whilst there will always be students whose preference is to live in traditional housing, we must ensure that further units of family housing are not lost to student HMOs because of a failure to meet the demand for purpose built accommodation. We will therefore, try to bring about the delivery of as much purpose built accommodation as possible in the next three years.

It is essential that new student development provides a highly attractive, affordable offer to students in order to make the purpose built market a highly desirable alternative to shared housing in communities: this should extend beyond the usual occupants of purpose built housing (first year students) to undergraduates in their second and third years also."

Link:
http://www.nottinghaminsight.org.uk/d/81429

From where I'm sitting, the 'affordable' bits are just window dressing; that just hasn't happened, and - at least in Nottingham - deliberate restriction of student accommodation in HMOs via Article 4 and gung-ho enforcement is designed to force students into institutions.

ML

[midlandslandlord]

A further quote from the Unipol Report, which is interesting:

Over the ten years from
2001-2 to 2011-12, the average weekly rent levels
charged by institutions have doubled from an average
of £59.77 a week to £117.67.
These steep increases in weekly rent levels have
taken institutional pricing up to within 1 per cent of
the levels set either by private providers or through
nomination agreements.
It seems reasonable to conclude that rents are being
set according to what constitutes ‘market rates’. The
particular leap in rents charged by institutions between
2009-10 and 2011-12 coincided with impending
changes to the higher education funding system. It
suggests that some institutions are looking to increase
rents as a means of subsidising other functions during
a period of financial restraint.
As they move towards greater economic stringency,
institutions have considered a number of policy options
on student accommodation. These tend to focus on
three areas:
• holding students to their contractual obligation to
pay rent if they leave a course and need to leave
their accommodation
• reducing service levels in areas such as cleaning
and security in student accommodation
• engaging in what some have called ‘aggressive
rent setting’
Not only have the cheaper rooms got more expensive
but there are fewer of them. In 2009-10 self-catering
single and ensuite accommodation made up 77 per
cent of institutional bed spaces. By 2011-12 this figure
had declined to 74 per cent and the balance continued
to shift towards ensuites, the more expensive of the
two options. Self-catering non-ensuite single rooms
now represent just 31 per cent of the accommodation
offered by institutions, down from 37 per cent only three
years ago.
The combined impact of falling supply and rising rents
for accommodation at the lower cost end of institutional
portfolios must be carefully considered. The range and
affordability of accommodation for students with limited
financial means must be of particular concern. There
may also be an impact on student mobility as a lack of
adequate and reasonably priced provision may lead
some young students to remain in their family home
rather than relocating.
UUK statistics have indicated that the proportion of
students living with parents increased dramatically from
12 per cent in 1995-96 to 20 per cent in 2004-0526. More
recently NUS research has suggested that this figure
may now be as high as 27 per cent among English
domiciled students (although it must be noted that this
is a self-selecting sample)27. It does, however, seem
possible that the conjunction of increasing fee levels,
increasing living costs and static maintenance loans
may cause more students to choose to live at home if
this is an option for them, as they try to minimise the
debt they incur during their studies.

There's also interesting data about numbers of rooms available by region 2006-2012.

In my area - the East Midlands - there are 10000+ extra private bedspaces in halls, and another 6000 from the Unis themselves.

The North East has seen no increase.

But those figures pehaps depend on who responded to the surveys.

ML

ML

[hech123]

You really should not need evidence if your in this market, just open your eyes and read a paper. I am only making observations which I feel are founded on pretty basic economic factors.

I aint wasting my time looking up hundreds of articles but I talk regularly to some of the top investors who own 200-500 units each throughout the North and we are all in agreement about this market.

That said we are all in the North - Newcastle, Manchester, Liverpool, Cumbria. I can not comment on elsewhere.

[theartfullodger]

So sorry mart, didn't realise you were so important, apologies...