Anticipating Future Trends in Student Accommodation

A recent study by the Higher Education Policy Institute has shed light on the current state of the student accommodation market and what the future of student accommodation might look like.

With a confluence of factors ranging from changes in university finances to shifting demands and cost pressures, the future of student housing is ripe for transformation.

University Finances and Their Impact

The financial underpinnings of universities have undergone significant shifts in recent years, profoundly influencing student accommodation. With frozen tuition fees and dwindling resources, institutions have been compelled to seek alternative revenue streams.

One notable avenue has been the expansion of international student enrolments, which, while initially lucrative, now face uncertainties due to geopolitical factors and the ongoing repercussions of the pandemic.

Moreover, reductions in fee income coupled with rising costs have compelled universities to reassess their financial strategies.

The Institute for Fiscal Studies (IFS) highlights a concerning trend of declining spending on education, posing challenges for both teaching resources and student maintenance packages. This fiscal strain has implications for accommodation provision, as universities grapple with budgetary constraints and competing priorities.

Reductions in Fee Income and Market Dynamics

The competitive landscape of higher education has also played a pivotal role in shaping student accommodation trends. Lower tariff universities, vying for international student enrolments, have engaged in pricing wars, leading to a decline in academic fee income per student.

This shift in market dynamics has implications for the supply and demand of student accommodation. While some institutions continue to invest in accommodation infrastructure, others face financial constraints that hinder such endeavours. The looming spectre of political uncertainty and budgetary pressures exacerbates these challenges.

Read more about the current state of student accommodation here.

Anticipated Trends in Student Accommodation

Looking ahead, several trends are poised to shape the future of student accommodation:

1. Stabilization of Demand: National student demand is expected to plateau in the coming years, with localized shortages persisting in key urban centres. This trend necessitates targeted investments in accommodation infrastructure to alleviate housing shortages and ensure student well-being.
2. Evolution of Purpose-Built Student Accommodation (PBSA): Despite projections of new PBSA developments, challenges such as high build costs and financing constraints may hinder their timely delivery. Moreover, the geographical distribution of new beds often fails to align with demand patterns. For example, there were an additional 1,136 beds in over-supplied Coventry, whereas Bristol, Brighton and York received very few (only 24, 60 and 81 new beds respectively).
3. Balancing Affordability and Quality: Affordability remains a pressing concern for students. The PBSA market will continue to see new student accommodation being developed that is getting more expensive as each year goes by. Cushman and Wakefield’s latest report suggests the new bed rental cost for 2023/24 is £205.39 a week compared with all previous PBSA at £167.93 a week, a 22% increase in one year. While PBSA caters to diverse student demographics, efforts to offer lower-cost options must contend with escalating operational expenses and regulatory requirements.
4. Partnerships and Innovation: The current slowdown in PBSA development, coupled with uncertainties regarding the long-term supply of off-street housing, presents a window for developers and educational institutions to address pressing issues of affordability and forge new partnerships. With a few years to adapt, stakeholders can delve into understanding local accommodation supply and demand dynamics while considering more cost-effective solutions proposed a decade ago.

The question looms: will educational institutions step up to champion more affordable housing options, potentially reshaping private sector development to align with their own long-term priorities? Moreover, can they shoulder the associated risks?

As student rents surpass current maintenance arrangements, living costs weigh heavily on students' institution choices. Will we witness a proliferation of PBSA units averaging £300 per week in three years, as projected, or will we see the rise of innovative alternatives?

If you are interested in letting your property to students, accommodationforstudents.com is the no.1 student accommodation service in the UK.