The demand for PBSA continues to rise. As it does, the Scottish Government is set to release its PBSA review that is hoped to bring about change and confidence in the future of the sector, and what it means for national and international students living in the university cities. Shoosmith’s Kirsten Belk discusses the review.

By Kirsten Belk, Real Estate Associate at Shoosmiths

The PBSA review, initiated in 2021, is set to be published by the Scottish Government.

This much-anticipated review, based on the results of a research project by the Collaborative Centre for Housing Evidence – a multidisciplinary partnership of academic institutions, housing policy and practice – aims to provide a roadmap of how key challenges can be addressed in the PBSA sector.

Hopefully its findings – based on consultations with students and stakeholders – will build on the high-levels of investment into PBSA, helping to maintain the positive momentum that is being experienced within what is now a well-established, expanding and robust area of Scotland’s real estate market.

Growing PBSA market

Demand for high quality PBSA is strong. Analysis from Savills shows that the sector defied macroeconomic challenges in 2022, with £7.8bn of UK stock traded – up 89% on 2021.

The prestige of Scottish universities is attracting significant numbers of domestic and international students, fuelling demand for accommodation in Scotland’s university cities. Savills’ research ranked Edinburgh, Glasgow and St Andrews as top-tier locations in its PBSA Development League Table, with a high student-to-bed ratio and/or a limited pipeline and need for new accommodation.

This demand underlines the sector’s long-term growth potential. It is arguably proving to be resilient at a time when economic headwinds are presenting challenges for the wider real estate market.

A number of significant PBSA developments have recently been announced across Scotland’s university cities, including in Glasgow, Edinburgh and Dundee.

In Glasgow, the city with the largest student population north of the border, 300 PBSA units are planned in a development announced in May 2023 by Nova Living. Notably, accompanying Nova’s planning application was a ‘statement of need’ – citing the intense pressure within the city for rented accommodation, as student demand outpaces supply.

Fusion Students, a student housing developer, is also demonstrating how PBSA can help to drive regeneration. It is planning to transform the former M&S store on Glasgow’s Sauchiehall Street into accommodation for 634 students, with ground floor commercial units, a rooftop terrace and gardens.

In Scotland’s capital, PBSA developer and operator Host has been granted permission for a 289-bed scheme in Edinburgh’s Gorgie Dalry area. The development, which includes secure cycle parking for all students, exceeds the City of Edinburgh Council’s environmental requirements and will transform an unused site, showing how schemes can open-up transport corridors between cities and campuses.

Shoosmiths has been advising on a PBSA development in Dundee city centre. The planning application, lodged by Newtide Investments Limited, is for a 215-bed development on the vacant site of a former nightclub, with the scheme set to include study areas, a cinema room and bike storage.

Intervention

As demand for accommodation increases, some domestic students are struggling to secure an affordable residence within a reasonable commute of their education centre.

Edinburgh University Students Association is among those to publish concerns about the affordability of PBSA. It is particularly concerned about PBSA’s exemption from the Private Housing (Tenancies) (Scotland) Act 2016 and local authority affordable housing criteria.

The National Union of Students Scotland is also calling on the Scottish Government to introduce a PBSA regulator and for the creation of more ‘rights to quit’ student tenancies.

These are just some of the factors that are set to be considered as part of the PBSA review. Others include the possibility of providing rights to terminate student leases on 28 days’ notice to match the Scottish private residential tenancy, and for a rent control mechanism.

It is clear that more must be done to tackle the supply side aspect of PBSA, with estimates showing that the UK could potentially face a shortfall of up to 450,000 student beds by 2025.

The review must, therefore, take into account the impact that potential measures could have on the market, including on developers’ ability to bring new beds forward and the role of investors in this.

Demand for high quality student accommodation is here to stay. The challenge for the PBSA review is to identify a sustainable way forward that considers the interests of all parties – striking a balance that allows the sector to continue expanding, while ensuring students have access to accommodation.

Any significant legislative and regulatory intervention may risk undermining confidence and the goal of alleviating pressure on the private rental sector in university towns and cities.

Given the supply chain issues and interest rate rises that developers are dealing with, it is hoped that the outcome of the review focuses on developing codes of good practice for the industry. This will reaffirm confidence in the PBSA sector and stimulate much-needed investment and development.