Student landlords don’t need to have a degree in mathematics to work out the figures for multiple lettings give bigger profits for the same house than letting to a family.
This is at the heart of the current battle between the UK government and landlords with rental property investments.
The government wants to regulate multiple lets or houses in multiple occupation (HMO) after creating the market inn the first place.
Because the house price crunch and growing number of students has eroded capital growth, landlords have turned to monetising their property investments from rents.
For many in university towns and cities, the ready flow of tenants with a need for somewhere to live has turned in to a tsunami flooding the area with cash.
How does multiple letting work?
A landlord has a three bed roomed home with two receptions, a kitchen and bathroom and wants to maximise the rent.
Option A is move in a family on an assured short hold tenancy agreement for about £650 a month, giving a total rental of £7,800 per year at full occupancy.
Option B is move in four students by converting one reception in to an additional bedroom. Each pays £70 a week for 35 weeks a year, giving a total rent of £9,800 per year.
Option C is just putting three students in at £75 per room per week, for 35 weeks, giving as total rent of £7,875 per year.
The landlord’s strategy is a no brainer until April 2010 – the last options give the same or better return for less work.
After April, the government is taking a share of the extra rent, if not all of it, as planning and licensing costs.
As businessmen and women, landlords will tot up the costs of an HMO and revert to family lettings to save the expense of meeting stringent house in multiple occupation (HMO) compliance.
So, at a stroke, the government has appeased residents and councils by removing students and the related noise, rubbish and antisocial behaviour problems from neighbourhoods and created an army of homeless students.
No provision has been made for where they might live or what to do about the higher rents that they face paying because the few landlords left in the multiple letting market hike up their costs.
In reality the government moves to reform the student housing sector will just reduce the availability of letting property to students – unless there’s a loophole like letting to a managing student as a housemaster who takes on the responsibility of subletting to mates.