PBSA: How New Rules Will Hit Pricing, Capex and Returns

The Purpose-Built Student Accommodation (PBSA) sector in England and Wales remains a dynamic investment landscape for institutional and private equity capital. However, recent legislative shifts are set to reprice risk, bifurcate assets and influence capital deployment. Understanding these changes is not just about compliance; it's about protecting underwriting assumptions, identifying competitive advantage and avoiding value leakage through unpriced capex. This blog delves into the key legislative updates impacting PBSA.

Renters’ Rights Act 2025: Protecting Student Turnover and Income Visibility

The Renters’ Rights Act 2025 (RRA) is a landmark piece of legislation, with many provisions anticipated to come into force by 1 May 2026. Its core objective is to reform the private rented sector (PRS), introducing changes including the abolition of Section 21 “no-fault” evictions, assured periodic tenancies (APTs) and limits on rent increases.

Crucially for PBSA, the RRA introduces a strategic exemption. New PBSA tenancies will be exempt from the abolition of Section 21 and the new APT regime, provided certain conditions are met. These include providers being registered with government-approved codes of practice (eg ANUK/Unipol National Code) and tenancies being granted to full-time students at specified institutions. Transitional provisions will apply.

If the exemption does not apply, landlords will be able to use a new specific mandatory ground for possession designed to allow annual reletting to students (Ground 4A) if certain conditions are met.

The exemption offers a significant competitive advantage. Qualifying PBSA providers can: 

• continue using fixed-term tenancy agreements aligned with the academic year;
• regain possession at term-end without using new statutory grounds; and
• operate outside the new APT system. 

This preserves the annual reletting cycle and income visibility that many PBSA business plans assume, differentiating it from general PRS stock where tenancies will be more flexible and landlord control more constrained. Assets and platforms demonstrating robust compliance can justify sharper yields and potentially more attractive debt terms. 

Building Safety Act 2022: Capex Drag and Programme Risk

The Building Safety Act 2022 (BSA) is a core underwriting variable for forward funding, development and value add PBSA strategies. University and student accommodation blocks meeting height and unit thresholds (generally 18 metres or seven storeys high with at least two residential units) are explicitly treated as higher-risk buildings. 

Key BSA aspects include:

• Accountable persons: statutory duties on “accountable persons” (eg landlords/building owners) to identify, assess and manage building safety risks, requiring safety case reports and Building Assessment Certificates.
• Gateway process: a three-stage approval regime for higher-risk buildings, demanding enhanced scrutiny at planning, design and before occupation, which can significantly impact project timelines.
• Remediation orders: the First-tier Tribunal can compel landlords to remedy building-safety defects, irrespective of fault.
• Second staircases: new residential buildings over 18 metres are required (through changes to building regulations and guidance) to incorporate two separate staircases as a fire safety measure, impacting design and construction costs. 

Additionally, the Building Safety Levy (England) Regulations 2025, expected to come into force October 2026, impose a levy on building control applications for new residential developments, including PBSA bedspaces (with exemptions for small schemes under 30 bedspaces and for socially beneficial uses). This adds another layer of upfront development cost. 

These measures translate into an enhanced focus on building safety due diligence, potential re-sequencing of development programmes and the need to allocate remediation risk, design change costs and the Building Safety Levy burden. Incremental safety-related capex can materially impact equity returns if not priced in at acquisition.

Energy Performance Certificates: Embedded Capex and Exit Liquidity

New proposals signal a push for higher energy efficiency standards. New tenancies are expected to be required to meet an EPC rating of C or higher from 2028, extending to all tenancies by 2030. Currently, the legal minimum remains an EPC rating of E. These changes, part of broader Net Zero targets and the Government’s Warm Homes Plan, will apply to PBSA within the regime, necessitating potential capital expenditure for upgrades. Non-compliant stock will become progressively harder to let, refinance and ultimately exit, making it a business plan and capital allocation issue for private equity real estate owners. 

Practical Implications for PBSA Investment and Deal Execution

These legislative changes translate into a number of concrete actions for private equity real estate investors and lenders:

• Investment thesis and stock selection: focus on platforms and assets that demonstrate robust code registration, clean safety files and a credible path to desired EPC ratings. Assets failing RRA exemption criteria or having unresolved BSA or EPC issues may warrant pricing as "transition" stock, with returns driven as much by risk remediation as rental growth.
• Underwriting and pricing: explicitly include line items into underwriting for BSA-driven remediation, second staircase requirements, EPC upgrades and the Building Safety Levy. Run sensitivities on key financial metrics to account for potential loss or fragility of RRA exemption.
• Transaction structuring: use transaction documents to allocate regulatory and capex risk deliberately (eg development management agreements, price adjustment mechanisms, guarantees and escrow arrangements).
• Operations and value creation: leverage superior compliance, transparent student-friendly tenancy structures and demonstrable ESG performance as differentiators. Centralising code registration, building safety management and EPC planning can unlock operational efficiencies and enhance appeal to lenders and future buyers.
• Portfolio management: for existing portfolios, conduct systematic reviews of RRA exemption status, BSA compliance and remediation exposure and EPC trajectory against business plans. Integrate these findings into capex plans, refinancing strategies and exit sequencing. 

Key Takeaways for Sponsors and Lenders

The RRA exemption is creating a two-tier PBSA market: stock with demonstrable, sustainable compliance and stock without. The BSA and evolving EPC regime embed additional capex and programme risk that must be explicitly integrated into business plans, capex budgets and deal documentation, not treated as an afterthought. Sponsors and lenders who proactively audit portfolios, tighten operating compliance and hardwire risk allocation in transaction structures will be best placed to preserve yields, protect exit options and confidently deploy capital into a sector that still offers compelling fundamentals.