Solving the Student Housing Crisis: A Strategic Approach for Universities and Developers

Solving the Student Housing Crisis: A Strategic Approach for Universities and Developers

The UK media has extensively covered the student housing shortage that emerged in various cities and towns across the country between September and October 2022. The problem became apparent as universities struggled to accommodate their incoming students, leading to housing offers in different locations such as students at Manchester University offered accommodation in Liverpool. While some may argue that the scale of the issue is exaggerated, the shortage of student accommodation remains a recurring annual problem. It is crucial for policymakers to reconsider their priorities and address the key issue of student housing. However, guarantees for accommodation often come with specific conditions, such as choosing the university as the first preference or having a significant distance from a permanent address. These limitations raise concerns about the long-term viability of student housing solutions.

The Persistent Challenge

The student housing shortage in the UK has been an ongoing problem, particularly in certain cities, for many years. Even during 2020, which witnessed a historic low point in the population of 18-year-olds, the demand for accommodation outpaced supply at a rate more than twice as fast. Additionally, the UK's economic challenges, including the compounding effects of Brexit, the pandemic, and inflation, have further hindered the feasibility of constructing Purpose-Built Student Accommodation (PBSA). Despite being touted as a lucrative investment, institutional investors are cautious about the student housing market's optimistic projections.

The Significance of Student Housing

The shortage of student accommodation has far-reaching implications, as emphasised by Martin Blakey in his March 2023 HEPI blog. Insufficient housing affects a university's recruitment efforts, reputation, long-term planning, relationships with local communities, and its ability to make a civic impact. Accommodation also plays a critical role in fostering a sense of belonging among students, which in turn contributes to their retention—an increasingly important metric with the introduction of the Office for Students' quality standards. Ensuring student well-being is a shared responsibility, with universities dedicating substantial resources to support students as they transition to university life, manage finances, forge friendships, and adjust to new schedules.

Prioritising the Student Experience

University senior management teams are keen on attracting students to their institutions and continually strive to define, redefine, and enhance the student experience. A shortage of housing poses numerous practical challenges for both parents and current and prospective students even before they embark on their personal and academic journey. While building resilience in young adults is essential, the added burden of securing suitable housing at the start of their university experience does not foster resilience effectively. Universities, particularly those looking to expand, face limited options for school leavers in the current economic climate. Moreover, some cities have witnessed an increase in the popularity of Airbnb rentals while experiencing a decline in the availability of private housing for students. Local authorities' use of Article Four directives, which require planning permission for change of use, has reduced housing supply in urban markets. Simultaneously, increased regulations and the potential impact of the Renters Reform Bill have led some landlords to exit the market. Non-student demand for housing has further exacerbated the housing shortage.

Challenges in Developing New Housing

The market slowdown in introducing new student housing schemes continued in 2021/22. This trend is expected to persist due to escalating and uncertain construction costs, broader inflation concerns, limited land availability, and complex planning policies in certain locations. In London, the 2021 London Plan acknowledged the urgent need for student accommodation. However, the policy requiring 35% of developed rooms to be 'affordable' and a majority to be nominated by universities has hampered development, resulting in only a fraction of the required rooms being delivered. To gain deeper insights into the student housing shortage in London, David Tymms' 2022 blog for HEPI serves as a valuable reference.

Finding Solutions

Given the critical importance of economic growth to the future policy of any UK government, concerted efforts led by an organisation collaborating with the government and local authorities become paramount. The current student housing crisis presents an opportunity for significant investment to meet the substantial demand. A government review, similar to the All-Party Parliamentary Group (APPG) for universities but specifically focused on housing, could provide the impetus needed to initiate a more strategic and cross-sector approach to provision.

Developing a Comprehensive Model

Creating a model that considers the needs of universities and students is of utmost importance. Universities are understandably sceptical of partnering with inflexible investors who prioritise high returns and margins. To meet the diverse needs of student cohorts, universities must offer a mix of accommodations tailored to their location. Long-term investors and shareholders must stay well-informed about the evolving landscape of the student housing sector. Adequate capital for refurbishments, allocated at predetermined dates, is crucial for the long-term sustainability of projects, mirroring practices in other real estate sectors. Furthermore, recognising that institutional growth is also influenced by the size and utilisation of academic facilities, combining capacity expansion in both areas can lead to more effective solutions.

The Role of Partnerships

Partnerships between universities and private Purpose-Built Student Accommodation (PBSA) operators are becoming increasingly significant, with the number of beds managed by the private sector surpassing university-owned accommodations. Regulations may pose limitations on sharing personal information between different entities, but UUK's Information Sharing Guidance can stimulate innovative thinking to improve reporting mechanisms for student well-being concerns.

The Power of Collaboration

Collaboration is key to resolving the housing shortage. Despite the commendable efforts of many, there remains a reluctance among universities and developers to work together. Developers should engage with the higher education sector when undertaking such projects since universities generate demand. Similarly, universities, facing the current shortage, should be receptive to discussions that align with their strategic goals. Even if a particular housing model does not align with a university's specific residential strategy, maintaining open lines of communication enables collaboration when necessary.

The Way Forward

In my conversations with investors, operators, and universities, I have observed a willingness to develop solutions that keep pace with demand, surpassing supply. Accommodation partners must adapt their models to minimise the impact of societal shifts and support institutions grappling with evolving student needs. Universities make significant contributions to society, and they appreciate the support of the private sector. For instance, in addressing the well-publicised mental health crisis among young people, the under-resourced National Health Service (NHS) can benefit from a collaborative approach involving clinicians experienced in handling such issues. Housing owners, in conjunction with partner universities, can adopt a model that prioritises student welfare, effectively translating research findings into policy changes and meaningful improvements for marginalised or distressed students. While notable efforts have been made, concerns about the overwhelming volume of students requiring support and the limited resources available in the NHS and social services remain. All stakeholders involved recognise that inaction will disproportionately affect current and future students. Therefore, a collective effort to develop a timely solution is imperative.

Conclusion

Addressing the student housing crisis requires a strategic and collaborative approach from universities, developers, and relevant stakeholders. By developing comprehensive models that cater to the needs of universities and students, and fostering partnerships to bridge gaps in accommodation supply, the UK can tackle the ongoing shortage. Timely investments, open communication channels, and a shared responsibility for student welfare will contribute to a sustainable and inclusive higher education sector. Resolving the housing crisis will not only benefit individual students but also enhance universities' recruitment, reputation, and overall contribution to society.