The UK is currently facing a sector-wide supply and demand imbalance, with an increase of students starting university year-on-year and not enough accommodation for them to live in. However, purpose-built student accommodation (PBSA) could be the long-term answer students, universities and investors alike are looking for. Not only has it been reported that students living in PBSA are most satisfied with their experience compared to those renting the traditional way, but it could help ease the pressures of the decreasing number of landlords choosing to turn their assets into student housing. The UCAS Journey to a Million debate highlighted some of the key challenges that the industry is facing. Knight Frank and The Unite Group discuss these current issues, and what it means for the future of the sector.
By Merelina Sykes and Neil Armstrong, Joint Heads of Student Property at Knight Frank, and Richard Smith, CEO of The Unite Group
One of the most common reactions to a projected strong growth in applicants is: ‘But where will they all live?’ – one that is unsurprising given the recent and well-publicised student accommodation shortages in some towns and cities.
Housing the projected increase in students will be challenging, both in terms of the volume of beds required and the choice available to students at different price points.
There are currently 2.2 million full-time students in the UK, equivalent to around three students per available bed in PBSA. Projections made by Unite Students suggest that by the end of the decade there will be an additional 400,000 full-time students seeking some form of student accommodation.
It would be tempting to assume that the private sector will step in to meet the projected demand, but this is not a given. Supply in the private rented sector (PRS) – the typical shared student houses – is currently shrinking rather than growing. Fewer landlords are entering the market, and more are choosing to move away from the student market or sell in the face of increasing tax, regulatory pressures, and important and welcomed new energy efficiency requirements.
PBSA is growing, but not fast enough to meet the projected demand and at the same time older university stock has been decommissioned at a rate of several thousand beds a year.
Challenges around the price of land, high construction costs, skills and labour shortages, higher financing costs, and planning policy all represent notable headwinds to maintaining or meaningfully increasing supply from current levels.
Moreover, this is not simply a challenge of supply at the national level, but of matching supply to projected demand by university and city. The rise in student numbers has been unevenly distributed across the UK resulting in accommodation shortages in some cities and empty beds in others.
Research by Knight Frank shows that the shortfall in locations with the strongest historic growth in student numbers, like Bristol and Manchester, has been increasing at a rate of over 1,000 bed spaces per year. In both cities three additional full-time students have been added to the population for every new bed added to supply over each of the last five years.
The end of the decade may seem a long way off – most students who will be applying for the 2030 cycle haven’t started secondary school yet – but development takes time. Taking a scheme through planning to completion takes anything from three to five years. That puts an even greater urgency on the need to adequately plan for this expected growth now.
Meeting students’ needs
However, the challenge goes beyond a simple count of beds and into a consideration of the size, shape, and detailed requirements of future cohorts.
Since the expansion of the higher education sector in the 1990s, there has been a tacit assumption that university and private PBSA exists mainly to house first year students, but this reflects neither the current reality nor the direction of travel.
For example, according to Unite Students’ reservations so far this year, rebookings from returning students are up 67% since the 2018/19 cycle. In part, that reflects constrained availability in the PRS, but there is also evidence to suggest that university run and private PBSA is delivering the best outcomes for students.
Knight Frank’s Student Accommodation Survey, conducted alongside UCAS, confirms that students living in some form of PBSA are the most satisfied with their accommodation. In total, 80% of students currently living in privately owned and operated PBSA said they would recommend it to other students.
Moreover, outside of the projected growth in applicants sits the growing but less predictable segment of international postgraduates.
Demand from China is strong, but growth has slowed over recent years. New international markets such as India and Nigeria have led to a rise in demand for both traditional accommodation and for family accommodation, and this latter demand is difficult to meet in the current PBSA market.
Accommodation planning will require universities and private providers to take a decision on whether to embrace these new demands or leave them to private landlords.
Nor can we assume that study patterns – and therefore tenancy patterns – will be the same for all students when we know that higher education programmes are diversifying as well as expanding.
While traditional patterns of study are unlikely to change for most students, those who are combining study and work may need a more flexible offer but an equally supportive and student-centred environment. As the offer to students continues to diversify, it will take time and innovation to develop new accommodation offers for students with different study patterns.
Flexibility will also need to be considered in relation to the use of the buildings themselves.
Knight Frank’s records suggest that over 60% of the current stock of student bedspaces were delivered to the market pre-2012, so sustainable refurbishment and repurposing of current assets will play a crucial role in meeting current and future needs.
That could mean repurposing redundant back-office areas for better use as student communal space or additional bedrooms, or converting swimming pools into cinema-style auditoriums.
But student accommodation is so much more than bricks and mortar. Over the last decade, we have seen a renewed interest in the quality and impact of the accommodation experience in a way that harks back to the Robbins Report of the 1960s.
For students living away from home, PBSA is once again viewed as an opportunity for learning and development in contrast to the ‘bed space’ narrative of the previous generation. Much of this is driven by students themselves who value and benefit from a sense of safety, community and belonging.
Moreover, after many years of successful programmes to widen access, we should expect to welcome a more diverse community of residents each year, one whose requirements are worlds apart from those of the post-Robbins cohorts.
Together with the rise in recognised mental health issues and neurodiversity among the student body, this points to inclusion as an essential aspect of student accommodation over the remainder of the decade.
It will mean different ways of thinking and working, such as universal design approaches to buildings and services, workforce development, improvements to recruitment practices, and a continuous review of allocation practices.
Mental health support deserves a special mention given its increased visibility in higher education policy and wider society over the last decade.
The role that student accommodation plays in student mental health has started to be recognised, and arguably the de facto duty of care is beginning to change. This comes at a time when private PBSA now operates the majority of student accommodation.
Crucially, it is also impacting student decisions on where they live. Some 61% of respondents to the Knight Frank/UCAS survey indicated that their accommodation providers commitment to supporting student wellbeing and mental health was important to their choice. The relationship between universities and private providers will become more significant as we grapple with practical issues such as data sharing and referral pathways.
Planning for growth
There are no simple answers to the challenges set out in this essay, but collaboration will be essential in developing solutions.
Higher Education (HE) Institutions are at the nexus of these challenges: they hold planning data on the number, demographics, and residential requirements of projected intakes that enables conclusions to be drawn on future requirements.
Insufficient or unsuitable accommodation constitutes a risk to these plans and to the institution’s reputation, and there is potential for more strategic focus here. A poll of CUBO members, cited in a recent HEPI blog, found that only around 10% believed their institution had factored in accommodation as part of their recruitment plans. That could be seen as short-sighted given the importance that students themselves place on accommodation.
Over 50% of applicants to university this year said that the availability of accommodation had influenced their decision on where to apply to study, according to the Knight Frank/UCAS study, and that less than 70% thought there were enough accommodation options in their chosen city, down from 80% last year.
Some institutions may take this as an opportunity to increase local recruitment, others may work proactively and strategically with local planning authorities and accommodation providers to secure a future accommodation pipeline that matches their growth ambitions.
There is no blueprint for what good looks like, but we can draw on existing frameworks. The Draft Nottingham Student Living Strategy, for example, offers a joined-up approach from Nottingham City Council, Nottingham Trent University and the University of Nottingham when considering supply and demand imbalances across the city, with focused measures on how they are recording progress, such as capturing data on ‘returning’ students to PBSA.
For private PBSA providers, it means committing to dialogue and partnership working and to a longer-term view of the market.
Meeting the accommodation demand that is potentially created by significant growth in applicants is far from straightforward for many reasons, not least the unpredictable nature of the pattern of this demand. PBSA has a clear role to play in supporting HE institutions to accommodate the coming cohorts of applicants, and a collaborative and planned approach to growth, especially at the local level, can help to avoid the problems that come with accommodation shortages.
However, we cannot lose sight of the ultimate goal: to provide an exceptional student experience that meets the needs of the next generation of learners. By deepening our understanding of future students and designing and managing accommodation with their needs in mind, we can help create a more inclusive, sustainable and enriching experience.