Meeting increased demand
Over the last 5 years we have seen accelerated growth in the number of students applying for university – student numbers are continuing to rise with a record 44% of 18-year-olds in England applying for a full-time undergraduate course for the 2022/23 academic year. This represented 14,000 more applicants than the previous year and almost 50,000 more than in 2019. This rise in demand for higher education has been accompanied by a greater demand for student accommodation which continues to outpace the supply of available beds.
With the population of 18 year olds forecast to continue rising and increasing numbers wishing to attend university it is anticipated that the demand for student accommodation will continue to grow. International student numbers also continue to rise, driven by the weakened pound and the attractiveness of the UK’s excellent academic Institutions.
Purpose Built Student Accommodation (PBSA) is therefore an increasingly popular sector, turning the heads of universities, investors, and developers alike. Gerald Eve are working with a number of student accommodation providers and universities to deliver student accommodation across the capital where demand is outstripping supply. This note sets out some of the key issues to be considered when delivering PBSA to ensure the best prospects of success at planning.
PBSA is housing that is constructed by private developers designed explicitly for students. In most cases, PBSA developments will offer a range of room types, from groups of clustered flats with shared communal facilities to private studios. This is often accompanied with additional amenities, including facilities such as gyms, cinemas, games rooms and study areas. Most PBSA is either located within close proximity to major universities, town centres or transport systems to allow students easy access to their universities and/or local amenities.
The key difference between standard university student accommodation (or student halls) built by the Universities themselves, houses in multiple occupation (HMO’s) and PBSA is that PBSA is managed and operated independently.
Historically PBSA has been popular with International Students (from East Asia in particular) who typically have more to spend on accommodation than domestic students who to date have preferred the HMO market. With the cost of HMO accommodation rising in London such that it is almost comparable with the cost of PBSA, we are beginning to see more domestic students choosing PBSA.
We know that the student experience is critical and accommodation plays a vital role in this. The quality, number and types of spaces on offer within student accommodation developments is therefore increasingly important. Spaces that were once considered suitable are no longer fit for purpose, with students now expecting a much more holistic experience, with a focus on modern and stylish accommodation, impressive communal and amenity facilities, mental health and wellbeing support and perhaps most importantly, a home away from home. This changing culture has subsequently shaped the student property market and PBSA has proved to be a way to deliver on this.
Outside of London, HMO accommodation continues to present the most affordable student accommodation option with many major university cities having been the focus of the boom in premium PBSA attracting international and post-graduate students. As a result, there are identifiable gaps in the mid-price PBSA market in many cities as the attraction of the serviced nature of PBSA grows.
The London Plan requires that to follow the Fast Track Route and avoid any viability discussions, at least 35% of the accommodation must be secured as affordable student accommodation (rising to 50% where development is on public land or industrial land appropriate for residential uses). The definition of affordable student accommodation is a PBSA bedroom that is provided at a rental cost for the academic year equal to or below 55 per cent of the maximum income that a new full-time student studying in London and living away from home could receive from the Government’s maintenance loan for living costs for that academic year. The actual amount the Mayor defines as affordable student accommodation for the coming academic year is published in the Mayor’s Annual Monitoring Report.
Outside of London, a number of UK cities are preparing affordable housing policies for new PBSA development due to the high cost of living. A consistent approach is yet to emerge as individual authorities consider their local circumstances and planning authorities will be mindful of not wanting to discourage investment through setting target provision too high in recognising the benefits that PBSA has on reducing pressure on general housing stock.