According to professional services firm PwC, a huge shortage of affordable student accommodation may hinder universities' ability to attract students.
The situation is also being made worse by an imbalance between the demand for student homes and its supply, along with rising energy costs, resulting in rent increases that outpace inflation.
The report also warns that escalating construction costs, driven by inflation, are making the building of new purpose-built student accommodation (PBSA) increasingly expensive.
PwC also says that tight regulations and planning rules are complicating the PBSA building process.
'Students may face limited choice'
PwC's education leader, Damien Ashford, said: "Many students may face limited choice in relation to the mode and location of their studies, coupled with reduced access, choice of location and quality of accommodation they can afford.
"This may add to existing concerns over students' mental health and social wellbeing, and more students are likely to be unable to manage financially."
He added: "The most disadvantaged students will be hit hardest, leading to narrowing access to higher education and increasing dropout rates."
Student landlords struggling with increased regulation
The report also points to student landlords struggling with increasing regulations leaving the sector to create a shortage of student houses for rent.
PwC says there could be 95,000 fewer beds available - which will spark strong competition among students looking for accommodation.
Also, as student accommodation costs continue to rise, students' maintenance loans are predicted to be insufficient to cover their accommodation and living expenses in the coming year.
That’s because despite inflation reaching more than 10% this year, the government has only increased the student maintenance loan by 2.8%.
As a result, more students will have to work to help pay bills which could affect their student experience and potential outcomes.
The PwC report also makes clear that students may be forced to choose a university in cities with cheaper accommodation.
Cities facing significant pressure on student accommodation
PwC has also identified several cities facing significant pressure on student accommodation, including Glasgow which has seen a substantial increase of around 18,500 students, while Bristol and Manchester have experienced rises of 10,500 and 10,000 students, respectively.
These cities have all been ranked in PwC's top 10 cities outside London with the most significant squeeze on accommodation for the upcoming 2023-24 academic year.
To address the problem of supply, PwC recommends that universities collaborate with local authorities to provide more student beds or work with the private sector to increase the availability of affordable beds in PBSA stock.
Its analysis also indicates that if the current demand and supply imbalance persists, then student accommodation rents in various cities will be at higher than inflation rates.
'No easy or fast fixes'
PwC's education and student accommodation corporate finance director, Karen Best, said: "There are no easy or fast fixes that do not come with considerable compromises, whether financial or that adversely impact student experience.
"However, from what we see there is widespread motivation across all market participants to relieve these pressures. We believe there are opportunities, particularly in locations where demand is already at a crisis point or may be soon, for universities to work with both the public and private sector.
"In our view, this collaboration will be essential to finding innovative ways in the short, medium and long term to tackle accommodation shortages and affordability challenges."
'Student landlords in the UK'
The managing director of Accommodation for Students, Simon Thompson, said: "The report will not come as a surprise to most student landlords in the UK.
"Many will already know that supply is weakening as landlords decide to sell up and student accommodation demand is growing - as are rents.
"But Ms Best is right when she says that collaboration is necessary between landlords, universities and the government to tackle affordability and student accommodation supply issues."
He added: "There needs to be quick action, or we face pricing students out of the course choices they want to do."
