‘The student housing sector is feeling the pressure’

James Maguire, from student rent guarantor service Housing Hand, says the student rental market is buffeted by economic pressures, facing students with a challenging few terms

Students sitting their A levels in 2022 have finally been able to put down their pens and breathe a sigh of relief, with the Joint Council for Qualifications’ window for this year’s exams now closed. For many students, this means an end to exam-related stress but the beginning of worrying about results. And this year, there’s another worry too: finding university accommodation.

The student housing sector is feeling the pressure already, with dwindling numbers of private landlords at a time when demand for university places from domestic students has hit a record high. Savills’ UK Student Accommodation – Q1 2022 report describes the number of HMOs as “constrained and contracting” despite continuing growth in not just Ucas applications from domestic student numbers but international students as well. That follows the largest first-year intake ever recorded in 2021.

Strains in the private sector

The UK government’s increased taxation of landlords over the past few years has made owning a rental property less lucrative – and thus less attractive – than it used to be. This has discouraged some landlords from entering the private rented sector at all, while a fair number of those who already own rental properties have sold up and invested elsewhere.

With landlords required to foot the bill for bringing their properties up to an energy rating of C or above by 2025 under the new Energy Performance Certificate regulations, it’s easy to anticipate a further exodus over the next couple of years as well.

The role of PBSA

Purpose-built student accommodation (PBSA) is certainly attempting to pick up where private providers have left off. As an asset class, student accommodation of this nature has proven itself in terms of its potential for generating income. And with student numbers rising and the private rented sector falling away, the future is looking rosy for PBSA providers.

According to Savills, investor demand for PBSA saw £4.1bn traded during 2021. APG and Blackstone’s £969 million acquisition of GCP Student Living stood out as the highlight of the year. It also marked 2021 as the sixth consecutive year to see a portfolio deal of more than £0.5 billion – and the third year in a row to see one of nearly £1 billion or more.

Despite the huge appetite for PBSA investment, this part of the student housing sector is not without its issues. Rents are rising fast, increasing by 4.4% in 2021 and by 61% over the past 10 years. This has driven both Unipol and the NUS to warn of the impact on students from less well-off backgrounds. This year, the cost-of-living crisis is going to add further pain for those students on lower budgets.

Families face the consequences

This pressure on the sector to provide enough accommodation – and at an affordable price – is translating to families feeling the pressure. Students are facing spiralling living costs. From their food to their energy bills, prices are rising on every side. According to grocery trade body IGD, food price rises are projected to hit 15% over the summer months. The Bank of England, meanwhile, is expecting inflation to reach 11% by October.

Yet even though rents continue to rise, and with the increasing challenges around the cost of living for students, PBSA’s co-living proposition is still proving real value for money, as it includes bills, broadband and other amenities that students would normally have to pay separately for, giving students the security of a set amount of rent per month for the year and can thus enable them to budget more easily.

For students, though, the problem has a further twist. Due to Covid, many are nervous about arranging their university accommodation until the very last minute. Housing Hand saw the impact of this in 2021 and is anticipating it will occur again this summer. Our ‘busy season’ – the time when the majority of the students apply for Housing Hand to act as their rental guarantor – used to begin in June and run through to September. Many students were happy to arrange their accommodation based on their predicted grades. Now, however, we’re seeing vast numbers of students wait until they receive their A-level results in August before they move ahead with arranging accommodation.

This makes sense in a world where Covid case numbers are once again rising and the spectre of further lockdowns is always lurking in the background (albeit at quite a distance right now). However, this also leaves very little time to arrange somewhere for the student to live. It means that the lion’s share of the available accommodation gets snapped up very fast, further cranking up the pressure. It’s a tough outlook for those who’ve invested so much into passing their A levels, in order to begin their higher education journey.

James Maguire is head of sales and business development at Housing Hand

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