The UK Student Housing Shortage: A Problem Worth Solving
It has been widely reported that students enrolling at universities in Manchester have been offered housing in Liverpool and Huddersfield, that students enrolling in Bristol have to travel from Gloucester and Cardiff, and some attending university in St Andrews travel to Dundee and elsewhere for housing. The University of Glasgow has also indicated that it now cannot guarantee accommodation for its students.
There’s always a slight hesitation in repeating these reports, with the numbers affected (perhaps even over-exaggerated) to highlight a particular political slant or encourage policy-makers to rethink their current focus to make student accommodation the key issue.
Understanding the Problem
For many of us experienced in the housing of students each year, the guarantee for accommodation can come with a few caveats such as the applicant having had to choose the university as their first choice before a certain date, or not having a permanent address within a commutable distance. Furthermore, this guarantee usually extends to only new students at that university.
This isn’t a problem that is going to go away. For those familiar with the UK Higher Education (HE) sector, this has consistently been a problem — a big one — for many years. Even at the historic low point in the population of 18-year-olds in 2020, demand for accommodation was increasing at more than twice the rate of supply. This, of course, was before the UK economy was ravaged by the compounding impacts of Brexit, the pandemic, and spiralling inflation, all of which have significantly damaged the viability of delivering new purpose-built student accommodation.
It is also a problem affecting more than just a few individuals. The Campaign for Affordable Student Housing (CASH) claims that over 400 students were unable to find accommodation in St Andrews and waiting lists for accommodation across many cities in the UK exist in the run-up to the new Academic Year. Although this is certainly not a new phenomenon, the dynamics, however, are changing quickly.
Assessing the Scale and Impact
The impact of this problem is considerable. It affects a university’s recruitment, reputation, future planning strategy, local community relationships, and its work to propel its civic impact. Accommodation is also a critical factor in establishing with students the sense of belonging that underpins retention, a metric that has now become even more important with the introduction of the new Office for Students baselines regulating quality.
Furthermore, because the importance of mental health and well-being of our broader population is seen as a key responsibility of leaders across all sectors, an enormous amount of resources in Higher Education is directed towards ensuring that universities are well-equipped to support students with the understandable pressures associated with leaving home, creating friendships, managing one’s own finances, and adapting to a new life schedule.
Defining, redefining, and maintaining the student experience is also an utmost priority in the minds of university senior management teams in order attract the best-placed students to their institutions. A shortage of housing for students creates a multitude of practical problems for parents, and current and prospective students to tackle even before embarking on the journey of personal and academic development. Building resilience in our young adults to adapt to life’s misfortunes and setbacks is necessary, however, it can be agreed upon that this particular challenge is not the best nor the most responsible approach for that.
On the face of it, this seems to be something easily resolved. We’re told there are investors keen to move into the student housing asset class, and that demand is high from a range of different cohorts. Universities — not all, but many — are keen to grow and the options for those who leave education are not exactly plentiful in the current economic climate.
Added to this is a change in many cities, particularly in those destination locations, where the appeal of Airbnb lettings have increased, coupled with an apparent contraction in the number of private dwellings available to students.
The UK has also seen a major reduction in the student let HMO market. The widespread use by local authorities of Article Four directives, has sharply reduced housing supply entering city markets, whilst a combination of increased regulation and the looming threat to landlords of the Renters Reform Act, has overseen a significant market exit. This has been further exacerbated by increased demand from non-students as the wider housing shortage deepens. In summary, demand for student housing is increasing on all fronts.
David Feeney, at Cushman and Wakefield’s Student Advisory Team outlined the characteristics of the problem at the recent Class Foundation Regional Forum in London. Taking the audience through this year’s UK Student Accommodation Report, Feeney noted that trends indicate a continued slowing in the supply of new PBSA. 2021/22 saw a continuation in the longer-term slowdown of new schemes being brought to the market.
This trend has the potential to become embedded across the sector for the foreseeable future, given escalating and uncertain build costs, wider inflationary concerns, land availability and, of course, planning policy in some locations.
The London Plan 2021 recognised that student accommodation is desperately needed in the capital, however, the policy to ensure 35% of rooms developed to be ‘affordable’ and the majority of rooms be nominated by a university, has curtailed development activity and has led to the delivery of only a fraction of the rooms needed. David Tymms’ blog for HEPI on the student housing shortage in London is an excellent reference point for those interested in understanding more.
Exploring the Solution Space
In a climate where the need for economic growth is undoubtedly central to the future policy of any party of government in the UK, the need for a concerted effort led by a body whose role is to work with government and local authorities to encourage greater collaboration between stakeholders, is critical and urgent. The current student housing crisis provides an opportunity for significant investment to meet a significant demand. Whilst the All-Party Parliamentary Group (APPG) for Universities is currently taking evidence on how to tackle the impact of the cost-of-living crisis on students, a review specifically focused on housing would offer the impetus needed to kick start a more strategic and cross-sector approach to provision.
Developing a model which takes into consideration the needs of universities and its students is of paramount importance. The scepticism around developing a solution with interested investors who appear inflexible with their expected IRR and associated margins, is understandable. Universities need to provide a mix of accommodation across their portfolio to meet the demands of the different cohorts of students and each residential strategy needs to reflect the nature of their availability in their location.
Equally, long-term investors and shareholders need to be fully conversant with the changing landscape of the student housing sector. Capital sums made available for refurbishments at predetermined dates, are essential for the long-term viability of projects much like in any other real estate offer. Additionally, any model developed needs to recognise that the capacity for growth at each institution is also defined by the size and utilisation of its academic estate – increasing the capacity of both, as part of a single project, representing a far more effective solution.
The role of partnerships between universities and private PBSA operators is becoming increasingly important as the number of beds operated by the private sector surpasses the number of university owned rooms. Regulations may inhibit the exchange of personal information between different parties, however UUK’s information sharing guidance should be a catalyst for greater thinking in how accommodation providers can work with host universities to improve the reporting of any wellbeing concerns as an example.
Collaboration is key. It seems to be that despite the sterling work of many, there is still a hesitance for collaboration between universities and developers. Universities provide the demand and for any developer in the UK not to engage with the HE sector when developing such projects is short-sighted to say the least. Equally, given the current shortage, universities should be at the very least responsive to such discussions.
The rallying call to conclude, is for all involved to recognise that inaction will impact one group — students — more than all others, and that group needs our collective efforts to develop a solution sooner rather than later.