The demand for student housing is at an all-time high, and this has created a crisis in the sector. The need for new student rooms is currently the greatest it has been in several years, with a chronic shortage of student housing in certain cities. Unfortunately, the high demand is not likely to be met with a greater supply. The situation has been exacerbated by problems in the wider buy-to-let sector and a slowdown in construction due to the pandemic. With rising costs for developers, students are starting university in hotels or commuting from long distances.
Skyrocketing Demand
The demand for student housing has skyrocketed in recent years due to various factors. The number of UK youngsters turning 18 is expected to increase by 19% by 2030, according to official forecasts. This demographic shift, combined with near record application rates, has led to a surge in student numbers. Additionally, there is strong demand among overseas students, particularly for postgraduate degrees. The combination of these factors has created a significant need for new student rooms.
However, the supply of student housing has not kept up with the demand. The London-listed university accommodation business Unite Group, which operates purpose-built student blocks, reported that nearly all of their 70,000 beds were booked by July. In a normal year, around 10% of these beds would still be available to rent at that time. This shortage is a reflection of the wider crisis in the buy-to-let sector, as higher interest rates and planned regulatory reforms have pushed landlords to sell their properties.
The construction of purpose-built student accommodation has also slowed down in recent years. The sector, known as PBSA (Purpose-Built Student Accommodation), currently accounts for around 700,000 beds. Until 2020, developers were adding over 30,000 student beds each year. However, the pandemic has led to a slowdown in construction, and more recently, financing and supply chain costs have posed barriers to new developments. As a result, the number of new student beds being added each year is expected to dwindle to 12,000-15,000 in the coming years.
One of the major challenges facing developers of student accommodation is the rising costs. According to property group Cushman & Wakefield, the build costs for developers are currently around £95,000 per en-suite room, up from £60,000-£65,000 in just a few years. To make their numbers work, developers would need to charge rents of £185 a week or higher per room. However, in most locations outside of cities like London, Edinburgh, Bristol, Glasgow, and Manchester, these rental prices are already above the broader rental market rates, which are already at record levels.
As a result of this shortage in student housing, there have been reports of students starting their university life in hotels or having to commute long distances to attend lectures. Some may even be forced to continue living with their parents due to the lack of available accommodation. Unless there is a significant reduction in developers’ costs, it is likely that students will continue to face difficulties finding suitable housing.
Summary
The demand for student housing in the UK is currently outstripping the supply, leading to a crisis in the sector. Despite a significant increase in the number of students, the construction of purpose-built student accommodation has slowed down, largely due to the wider issues in the buy-to-let sector and rising costs for developers.
This shortage has left many students struggling to find affordable housing, with some starting their university life in hotels or commuting long distances. Unless there are notable changes in the affordability of student housing, this problem is likely to persist, leaving many students without suitable accommodations.