Proposed changes to Non-Domestic Rates in Scotland - What does this mean for the student accommodation sector?

An amendment has been tabled by the Labour Party at the Stage 2 Reading of the Non-Domestic Rates (Scotland) Bill that could change how purpose-built student accommodation (PBSA) is taxed in Scotland.

There is potential for this to materially impact operating costs of PBSA and consequently value. Talk of this bill raising £18 - £19 million through Scottish PBSA suggests a new charge of between £500 - £600 per bed per annum, not dissimilar to the circumstances in Belfast. This could have a material impact on valuation (reductions of £10k per bed) or if passed on to students, could see rent rises by over £10 - £15 per week.

“The application of non-domestic rates to private PBSA in Scotland is likely to have a material impact on investment in new schemes in Glasgow, Edinburgh and elsewhere and result in significant rent rises for students. The potential for unintended consequences to Scotland’s world class education system deserves a more considered and joined up approach from its politicians.”
David Tymms – Chair, BPF Student Accommodation Committee

Below we have put together a summary on what we know to date about the amendment and the key issues we believe could be faced by the sector if the Bill is passed.

Current Position

At the moment Student Accommodation is entered on the Council Tax List but students get exemption from paying Council Tax.

What is happening?

  • An amendment to the Non-Domestic Rates (Scotland) Bill has been put forward by Labour Member of Scottish Parliament (MSP) Sarah Boyack – known as amendment 85, which aims to make Private Sector Student Accommodation providers pay Non-Domestic Rates by having PBSA listed on the Non-Domestic Valuation Roll rather than the Council Tax List.
  • This stage 2 amendment was put forward in the Local Government and Communities Committee meeting in November 2019.
  • Stage 2 of the process has been passed, which means the amendment is proceeding and could potentially become law if it passes the next stage.
  • The amendment has been agreed by all parties, but SNP (Kate Forbes) and Conservative (Graham Simpson) members did comment on the potential for unintended consequences which may warrant the amendment requiring further work at a later date.
  • The amendment will now proceed to the final opportunity for MSPs to propose amendments to the bill - Stage 3.


What will amendment 85 mean to student accommodation?

  • Under the proposed changes, private landlords of student accommodation which contain over 30 bedrooms will be charged non-domestic rates on the whole property including the dwellings themselves, not just the commercial and office elements that are already considered.
  • The amendment does not apply to PBSA operated by a university or any other educational institution.


What is the impact? To the market, businesses and valuation:

Initial comments from across the market about the potential impact this could have on the sector include:

  • Values are likely to be significantly affected by this amendment. Operational costs will increase which will have a material impact on the net income. CBRE would estimate that this amendment could reduce value by circa £10k or more per bed if yields stayed the same.
  • Business rates are already paid on the areas of a property that are not dwellings such as administrative office accommodation and other spaces.
  • Increased costs could be passed onto the students in the form of increased student rents. This could directly impact over 31,000 students estimated to already live in private PBSA as at 2019/20.
  • If not recovered by higher rents, it will impact the financial viability of new PBSA. A lack of investment and development in PBSA as a result of this amendment could further compound rental increases by impacting supply, especially if the student population grows. This does not support the government rhetoric or NUS recommendations for affordable accommodation for students.
  • The amendment does not support the need for developing PBSA across Scotland. As at 2017/18, there remains an estimated 38,200 full-time students across the five major Scottish higher education cities who may want PBSA but cannot access it due to lack of supply.
  • Major cities in Scotland are still experiencing competing housing pressures from student demand and other local communities in need of housing simultaneously. This bill does nothing to address that.
  • Policy appears to be coming first over practicality. There is likely to be uncertainty upon introduction of the amendment which could be a future negative impact as purchaser discount for unknown risk. There will need to be clear guidance on some elements such as:
    1. What method of valuation will assessors adopt?
    2. What will the units of assessment be – whole building or individual rooms?
  • There are numerous partnerships between private PBSA landlords and universities/higher education institutions in both short-term and long-term arrangements. This includes leases, nomination agreements and DBFO agreements. There is currently no clarity on how any of these arrangements will be treated under the amendment.
  • Scotland is home to world leading universities. It is widely recognised that the end-to-end student experience is key to maintaining a world leading position in the higher education sector and recruiting students. A lack of investment in PBSA, a key part of the student experience, could disadvantage Scottish higher education destinations when competing against other institutions throughout the UK and globally.


What happens next?

  • The amended version of the bill is published here, see- section 4A, Entering of certain student accommodation in valuation roll.
  • The new version of the bill incorporates the amendments the committee has agreed to regarding the non-domestic rates for student accommodation levy.
  • This version of the bill will be considered at Parliament in the final stage - stage 3 (currently no date is set as at the time of writing but we anticipate it will be sometime early February).
  • Stage 3 is the final opportunity for MSP’s to propose amendments to the bill, to tidy it up and debate any important issues relating to it. This provides an opportunity to raise issues about the changes to PBSA non-domestic rates. However, the Presiding Officer will decide in stage 3 which amendments will be debated.
  • After any further amendments have been passed, the bill is debated and a decision is made to on whether the bill should be passed. If the Parliament does not pass the bill, it will not become law and the process will cease.


Amendment 85 of the Non-Domestic Rates Bill could have significant impact on the operations of existing PBSA in Scotland for all stakeholders and future investor decisions about Scotland. The Bill is also fundamentally changing many aspects of the Rate system in Scotland including the basis for appeals, with possible appeal fees being mentioned. Many practical matters will need to be considered by the sector if this policy is implemented. Appeal rights in Scotland are already more time limited and restrictive than the rest of the UK. This amendment could be significantly prohibitive for the future of student accommodation in Scotland.

Sources: The Scottish Parliament, HESA Student Record 2017/18, CBRE Research 2019, Student Source 2019, NUS Accommodation Cost Survey 2018