The UK Student Housing Shortage – A push to partner 

• This HEPI blog was kindly authored by Sam Bailey-Watts of FRAH Consulting 

An overview 

The UK media outlets filled many column inches through September and early October 2022 as the scale of the student housing shortage, in some cities and towns in the UK, became apparent.  

It had been widely reported that students enrolling at universities in Manchester had been offered housing in Liverpool and Huddersfield, students enrolling in Bristol travelling from Gloucester and Cardiff, and some attending university in St Andrews travelling to Dundee and elsewhere. The University of Glasgow also indicated that it could not now guarantee accommodation to its new students. There’s always a slight hesitation in repeating these reports, the numbers affected perhaps overegged to highlight an ongoing annual issue, or to encourage policy makers to rethink their current focus to make student accommodation the key issue. Equally for many of us experienced in the housing of students each year, the guarantee will come with a few caveats such as the applicant having had to choose the university as their first choice before a certain date, or certainly not having a permanent address within a commutable distance. Furthermore, the guarantee usually extends to only new students at that university.  

This is not a problem that is going away. For those familiar with the UK higher education (HE) sector, this has consistently been a problem, a big problem in certain cities, 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. Added to this is the UK economy being 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 (PBSA). Despite being heralded by many as the asset class to invest in, many institutional investors do not appear to be taken in by the optimism of others. 

The impact 

The impact of this problem is considerable – as explained by Martin Blakey in his March 2023 HEPI blog. Accommodation affects a university’s recruitment, its reputation, its future planning strategy, its 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 for quality. Further, where the importance of mental health and wellbeing of our broader population is seen as a key responsibility of leaders across all sectors, in higher education an enormous amount of resource is directed towards ensuring that universities are well-equipped to support students. Including with the pressures of leaving home, creating friendships, managing one’s own finances and adapting to a new schedule.  

Defining, redefining, and maintaining the student experience is also uppermost in the minds of those university senior management teams keen to attract 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 for life’s misfortunes and setbacks is necessary. However, I’m not sure the added worry of finding suitable housing for the start of the university experience is a great way of building that resilience. 

Universities – not all, but many – are keen to grow and the options for school leavers are not exactly plentiful in the current economic climate. Added to this is a change in some cities, particularly in those destination locations, where the appeal of Airbnb lettings has increased, coupled with an apparent contraction in the number of private dwellings available to students. The widespread use by local authorities of Article Four directives, which prevents a change of use without planning permission, has sharply reduced housing supply entering city markets, whilst a combination of increased regulation and the looming threat to landlords of the Renters Reform Bill, has overseen some to exit the market. This has been further exacerbated by increased demand from non-students as the wider housing shortage deepens.  

In 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’ 2022 blog for HEPI on the student housing shortage in London is an excellent reference point for those interested in understanding more.  

The solution 

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 is critical and urgent. The current student housing crisis provides an opportunity for significant investment to meet a significant demand. Would a similar review by government to the All-Party Parliamentary Group (APPG) for Universities, specifically focused on housing 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. Universities are understandably sceptical about developing a solution with interested investors who appear inflexible with their expected return and associated margins. 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, represents 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. 

Collaboration is key. It seems to be that despite the sterling work of many, there is still a hesitance for joined up work between universities and developers. Universities provide the demand and for any developer in the UK not to engage with the higher education 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 if it helps them in achieving their strategic goals. Even where a particular model may not suit a university’s specific residential strategy, ensuring that channels of communication remain open will offer both parties the option to work closely when needed. 

In my discussions with investors, operators and universities, I note a willingness from all to develop and keep pace with demand where it outstrips supply. Accommodation partners need to continue to adapt their models to minimise the impact of societal shifts to support those institutions challenged by the changing needs. Our universities contribute huge amounts to society, not just financially, and they value the support from the private sector.  

The private sector does and can do so much more to support universities face the challenges they face by continuing to develop practical solutions. As an example, our much-loved, but dangerously under-resourced NHS is becoming increasingly unable to manage the effects of the much-publicised mental health crisis faced by of our young people. Developing an appropriate approach is a joint responsibility. Perhaps beginning to think about a model resourced by clinicians who have experience in dealing with serious issues should become the norm for those accommodation owners, in conjunction with the partner university. It’s hugely reassuring and impressive to publish research into the difficulties a particular cohort is experiencing, but how practically can we demonstrate that changes to policy and more importantly, behaviours are making a positive change to those students who feel marginalised and/or distressed. There are some great examples of efforts in this area however, at the recent inaugural Investor in Students session in Birmingham, members and panellists talked of their concern surrounding the ability of all in dealing with complex student welfare issues. In my experience, Residence Life, Student Support and similar student facing teams are overwhelmed with the volume of students needing support, and the lack of resources available in the NHS and social services to help in a timely manner.  

All involved recognise that inaction will impact current and new students more than any other involved party and a collective effort to develop a solution sooner rather than later is imperative.