Jon Wakeford argues that the student housing crisis requires a response
Study in Manchester, live in Huddersfield. Study in Bristol, live in Newport, Wales. Study in York, live in Hull. These are scenarios that hundreds of new students have faced in recent years. In Glasgow, the situation is even bleaker, with international students being advised not to travel or complete enrolment unless they have already secured housing in the city. Rather than these being one-off events caused by record results or local issues, annual accommodation crises are likely to become the norm unless action is taken at the national level.
The anatomy of the wider crisis in student housing dates back more than two decades, to the huge expansion in rates of participation in higher education following the Further and Higher Education Act 1992. The three-year, campus-based ‘live away’ model appears unstintingly popular, and the number of full-time students has increased by well over 800,000 since 2000, with accommodation becoming a critical facilitator of institutional growth.
The often—and sometimes understandably—maligned development of the purpose-built student accommodation industry filled a gap created by an ongoing reduction in capital funding for universities. If universities were either unwilling or financially unable to provide more accommodation, private alternatives would have to do the job on their behalf. The growth in private provision has been characterised by operators struggling to keep up with demand, despite having the benefits of affordable and readily available finance and a stable supply chain.
Economic outlook
This period may come to be regarded as a halcyon era. Following the triple impacts of Brexit, the Covid-19 pandemic and the war in Ukraine, the economic outlook for providing new supply looks radically and grimly different. Over the past decade, much student accommodation has been funded on long-term debt raised in capital markets based on historically low gilt rates. UK 30-year gilts have climbed sharply since January, radically altering the cost of developing. The double hit of this movement and the rise in the costs of raw materials and utilities is already having a chilling effect on the prospects for new supply.
Earlier this month, the Unite Group—the largest single operator of purpose-built student residences in the UK—issued a sobering assessment of the immediate future for provision in its quarterly trading update, noting: “In light of rising funding costs for new debt, we are reviewing our future investment plans to ensure investment activity delivers earnings accretion and attractive total accounting returns, while maintaining a robust balance sheet.”
In translation, one of the most long-established and active developers in the market is signalling that it will be taking a significantly more cautious approach to developing supply if costs and return on investment fail to stack up. Waiting for more benign economic conditions to deploy capital is more palatable than growing less profitably, despite the ramifications for supply.
Landlord exits
The final element of the ongoing student housing crisis is the reduction in supply of landlord accommodation in cities across the UK. This has been taking place incrementally for more than a decade, as local authorities seek to change the balance of tenant types in available rented stock.
Local authorities have increasingly placed restrictions on permitted development rights, forcing landlords wanting to convert houses for student use to seek permission—a mechanism for local authorities to control the supply of student lets.
Regulations on student housing have also tightened. As expectations on safety and quality have rightly increased, many landlords have decided to exit the market, either disposing of properties or seeking less regulated tenant types. The looming Renters Reform Bill could encourage further market exits.
Cost of living
So, if a student housing crisis is arguably in its infancy and likely to deepen in future, how should those in higher education respond? Universities are keen to support students, but the target of their support to date has been in terms of broader cost of living initiatives.
At the sector level, Universities UK has called for government hardship funding for UK students, alongside the reintroduction of maintenance grants. It is also pushing to ensure that students in accommodation—including halls—are supported against rising energy costs.
Some universities have acted unilaterally. The University of York, for example, which suffered accommodation shortages in 2021, became the first institution to give energy grants to students living in 2,000 landlord-owned properties.
None of this, however, deals with the structural lack of supply.
Actions and strategy
During the pandemic, a hiatus in university schemes coming to market was unsurprising. However, there is now an urgent need for a sector-wide response. The problem requires both short-term action to ensure universities and providers organise as effectively as possible and a longer-term strategic programme to ensure sustainable new supply can grow without significant impacts on university towns and cities.
In the short term, universities and operators need to work together to understand available stock across the country. This could include establishing a nationwide “clearing” centre for accommodation, funded through contributions from universities and operators. A body such as Ucas or Universities UK could provide a platform for this. Mandatory accommodation codes could oblige providers to submit returns to this body regarding accommodation still to be let ahead of each term—possibly in June to coincide with the Ucas main scheme deadline.
An immediate step could be to launch a commission establishing the shape and extent of the issue. This would convene all the relevant actors and provide evidence-based policy recommendations to government and others.
Development zones
It might conclude that in the longer term, a National Higher Education Housing Strategy should be developed. This could be run by, for example, the Office for Students and supported and facilitated by property experts already working in the sector.
As in other housing sectors, accommodation shortages are, at least in part, dictated by the planning environment. If universities are to prosper, students need to live somewhere, and this could lead to a requirement for specific development zones in cities with pre-planning agreements for student accommodation in areas identified as being in supply cold spots.
Student housing shortages offer no easy or quick resolution. Private sector residences—including those provided on campus in public-private partnerships—now represent 53 per cent of total supply and over the past two decades the private sector has shouldered most of the heavy lifting required to support increasing participation and institutional growth.
If the demand projections to 2030 and beyond are realised, and universities wish to benefit from the tide that floats all boats, they will need to engage more actively with accommodation providers, as well as be less reticent about developing residences on their own campuses.
Jon Wakeford is director of engagement at UPP and chair of the UPP Foundation.