Students struggle as PBSA rents outpace loans

Steve Lumley·5 July 2024·5 min read
Students struggle as PBSA rents outpace loans

University students in the UK are facing a growing financial burden as the cost of renting accommodation outpaces the increase in government maintenance loans, a new report reveals. 

Real estate advisor CBRE has researched the purpose-built student accommodation sector (PBSA) in the UK's 30 major university cities. 

It reveals a huge disparity between rent prices and loan amounts, raising concerns about affordability and student choice. 

Outside of London, the average yearly rent for an en-suite room is now £8,700, while the maximum maintenance loan a student can receive is £10,227.  

This means the average student rent accounts for 85% of the available loan.  

London students face an even greater challenge, with average en-suite rents exceeding the maximum loan amount altogether. 

Drop in student accommodation supply 

CBRE's head of student accommodation valuation, Tim Pankhurst, says the drop in student accommodation supply and growing rents could see students increasingly choosing to live at cheaper universities. 

He said: "Historically London has been the only UK city where the affordability of student rents hasn't aligned with the available maintenance loan.  

"However, we're now seeing this same trend play out across our key regional university towns." 

He adds: "As maintenance loan growth lags and the cost of attending university grows, we could see a shift in where they choose to go.  

"More than ever, the cost of living is becoming a key decision driver for domestic students when deciding where to apply to study." 

Bristol students face the most expensive rents 

CBRE says that students in Bristol are facing the most expensive rents for PBSA outside of London with an average rent of £335-£382 per week. 

In Manchester, the average student rent is £249 – £295 per week, Brighton averages £285-£341 per week and Edinburgh averages £214 - £301 per week. 

The report identifies several factors contributing to the affordability crisis - including a decline in the availability of traditional student housing options, such as Houses in Multiple Occupation (HMOs). 

Mr Pankhurst explains: "The loss of House in Multiple Occupation (HMO) homes has constricted supply further, driving up prices for existing accommodation and PBSA beds.  

"Some universities are struggling to house their students in the same city." 

He added: "We need to encourage the development of student accommodation and increase its provision, so it's affordable and accessible for all students." 

Landlords selling buy to let homes 

Another big issue highlighted in the firm's report is that landlords selling buy to let homes has seen the UK's private rented stock falling by 10% since 2016. 

Also, in England, the HMO licence numbers have fallen by 4% - leading to 60,000 – 90,000 fewer student beds. 

However, just 9,000 new beds were delivered to the PBSA sector in 2023, and there are only 14,000 beds projected to be delivered this year. 

That's much lower than the historic bed delivery figure of 30,000 beds, on average. 

CBRE predicts a potential shortfall of 620,000 student beds by 2028 if current trends continue. 

Growing interest from institutional investors 

The report also highlights a growing interest from institutional investors in the student accommodation sector which could help address the supply shortage. 

It says that just under £4 billion worth of investment deals were signed last year and universities are increasingly looking to development deals with the private sector. 

The head of PBSA investment at CBRE, Oli Buckland, said: "There is a significant wall of capital targeting the living sector in the UK.  

"PBSA yields are typically wider than build to rent yields, and CBRE's PBSA Index has shown an average total investment return of 10.78% in the last 12 years.  

"These consistently strong returns coupled with the availability of income-producing opportunities are attracting new and returning capital - both domestic and international." 

'The growing affordability gap' 

Simon Thompson, the managing director of Accommodation for Students, said: "This report by CBRE sheds light on a critical issue facing UK students: the growing affordability gap between student accommodation rents and government maintenance loans.  

"By understanding the causes of this crisis, such as supply constraints and low maintenance loan growth, stakeholders can work towards solutions." 

He added: "The situation affects the student accommodation sector more widely and work needs to be done to encourage investment by landlords. 

"News that the PRS has shrunk by 10% since 2016 as landlords sell-up needs to be understood and policies created to tackle fed-up landlords from leaving."