Student Renting: A Gambling?

 

Student Gambling

Ever booked a place to live, until arrive and think… “ this is not even what I expected”? For many renters, especially students in the UK, house-hunting feels a bit like a gamble. You’re scrolling through perfect-looking flats online, but when you finally move in, the reality doesn’t quite match the pictures.

The reason behind the phenomenon is a classic economic failure known as Asymmetric Information, an imbalance of information between sellers and buyers in any transaction process.

A Systematic Problem in the UK Student Rental Market

In fact, this is not dependent on luck, but rather a common phenomenon. According to the National Union of Students (NUS) Autumn 2024 rent report, 84% of surveyed students experienced issues with their accommodation. The reality behind the screen is grim: 48% of them have experienced mould or mildew, 44% issues with heating and cooling, and 20% with pest infestations (NUS, 2024).

Source: National Union of Students Autumn 2024, Student housing and rent Report

Figure 1: Problems Experienced in Rented Accommodation

Additionally, Figure 1 indicates that the problem of substandard housing conditions is widerspread throught the student rental market. Landlords have the full information about the property. They know exactly how damp the room is and whether the heater is working or not. However, to secure the tenant quickly, they might conceal some of the actual problems of the house and emphasise its newly painted walls instead.

On the other side, students face difficulty verifying the true condition of the house before physically moving in. As a result, they are more likely to be deceived and may be forced to bear these hidden defects.

Therefore, due to the numerous information gaps, students find it more difficult to assess the value of a house, thereby increasing the uncertainty of renting and the possibility of renting a property that does not meet expectations.

And this leads to a bigger question: if additional students are having bad experiences, why does the market still seem full of low-quality housing? What happened to all the nice properties?

 

Why Only Low-Quality Houses Remain?

Due to the risk of renting the “problematic houses”, students will reduce their willingness to pay for renting. Even if a high-quality flat in Deansgate looks guaranteed on Rightmove, a rational student will still pay attention to the hidden damp or pests. Thus, they refuse to pay a high premium and are only willing to pay an average price to hedge against risk. This is evidenced in Manchester, one of the cities most favoured by student, due to the poor living conditions, more than 350 students collectively withheld an estimated £500,000 in rent payments in April 2023 (Vinter, 2023), indicating that they were unwilling to pay an additional premium. As more students encounter similar unanticipatedly inferior housing conditions, their impressions of market quality also continue to decline.

Imagine you are an honest landlord who spends hundreds of pounds to maintain the quality of the house. Due to the existence of potential low-quality houses in the market, students won’t pay a fair premium for your house. With the market average price, you are unable to cover your costs.

As a result, the good landlords who charge a high premium must leave the market. Only the low-quality houses will remain in the market. This might lead to a vicious cycle, as the probability of renting a low-quality house increases, students may further reduce their willingness to pay, which causes more good landlords to leave the market. This not only significantly increases the difficulty of finding a preferred house, but also causes a complete collapse of the rental market due to hidden information.

The process discussed above is called by Economists as Adverse Selection, with asymmetric information, low-quality goods can drive high-quality goods out of the market. This mechanism was first formalised by Akerlof (1970), and economists tend to call the low-quality goods “Lemons” and refer to the high-quality goods as “Plums”. 

Figure 2: Process of Adverse Selection

From “Lemons” to “Plums”: How Do We Fix The Market?

As the core problem is clear, how to fix it? Increasing transparency and reducing the number of substandard housing units would be a very effective approach.

Historically, some solutions already existed and tried to correct the market:

·       Market Signalling: Schemes like Manchester Student Homes allow good landlords to signal that their properties meet certain standards, helping good “Plums” stand out (Manchester Student Homes, 2026).

·       Market Screening: Review platforms such as Marks Out of Tenancy or Google Reviews help students learn from past tenants and screen properties more effectively.

Although these tools have narrowed the information gap, due to the principle of voluntary participation, they still have limitations in practical application. Moreover, in a tight housing market, students often have to decide quickly with incomplete information.

This is where policy in the UK plays a role in correcting the market failure:

·       New Decent Homes Standard: Based on Phase 3 of the Renters’ Rights Act, extending the Decent Homes Standard to the private rented sector, with full compliance required by 2035, sets a minimum quality level (Popple, 2026). This will increase the transparency and make it easier for tenants to identify the drawbacks of the house.

·       Direct Enforcement in Local Level: In the selective licensing area of Manchester, landlords and agents must be licensed through completing an online application and providing safety certificates, such as gas and electrical safety, which reduce asymmetric information (Manchester City Council, 2026). The council monitors standards directly rather than leaving students to identify bad landlords themselves.

Source: https://www.regalestate.co.uk/news/the-renters-rights-act--what-london-landlords-need-to-know-ahead-of-1-may-2026--regal-estates/

By raising the cost of supplying low-quality housing and increasing transparency, these mandatory policies make it harder for the “lemons” to remain in the market and reduce asymmetirc information, which eventually makes the market less of a gamble for students.

In conclusion, renting an unexpected house is not solely due to bad luck, but also to asymmetric information and adverse selection. Through voluntary signalling and the introduction of mandatory standards, the market is compelled to correct itself. Hopefully, the interests of good landlords and students will be protected. Hope everyone can rent their favourite house in the future!

 References

Akerlof, G. A. (1970). ‘The market for “lemons”: quality uncertainty and the market mechanism’, The Quarterly Journal of Economics, 84(3), pp. 488–500. https://doi.org/10.2307/1879431. (Accessed: 27 March 2026).

Manchester City Council (2026). What is selective licensing. Available at: https://www.manchester.gov.uk/info/500368/selective_licensing/8196/what_is_selective_licensing/2 (Accessed: 02 April 2026).

Manchester Student Homes (2026). Landlord pages. Available at: https://www.manchesterstudenthomes.com/Pages/LL_Pgs (Accessed: 02 April 2026).

National Union of Students (2024). Student housing and renters 2024 report. Available at: https://assets.nationbuilder.com/nus/pages/4588/attachments/original/1731415791/NUS_UK_Student_Housing_and_renters_2024_report.pdf (Accessed: 25 March 2026).

Popple, L. (2026). ‘What is the decent homes standard?’, Goodlord Blog, Available at: https://blog.goodlord.co/what-is-the-decent-homes-standard#B (Accessed: 05 April 2026).

Sharma, S. (2026). The renters’ rights act – what London landlords need to know ahead of 1 May 2026, Regal Estates. Available at: https://www.regalestate.co.uk/news/the-renters-rights-act--what-london-landlords-need-to-know-ahead-of-1-may-2026--regal-estates/ (Accessed: 05 April 2026).

Vinter, R. (2023). ‘Manchester University students face expulsion over rent strike protest’, The Guardian, 4 June. Available at: https://www.theguardian.com/education/2023/jun/04/manchester-university-students-face-expulsion-over-rent-strike-protest (Accessed: 01 April 2026).