The higher education sector is an important contributor to the UK’s economy and is world renowned for its research and education. Over the last few years, our reports have highlighted this contribution and how the growing purpose-built accommodation sector is essential to house higher education students. Our reports have also identified how increasing the supply of purpose-built accommodation can help ease the housing crisis by freeing up family homes in towns and cities. As such, the increased delivery of purpose- built accommodation is welcome but there are increasing concerns about the type and affordability of both new and existing student accommodation.

Higher education and its students make a significant contribution to both national and local economies across the UK. The sector may only contribute around 3% of UK GDP but in some local authorities, the local economic contribution is over 10%. This also ignores any indirect additional impact on economic activity such as technology hubs or science parks. Meanwhile, as university participation rose and student numbers increased, the migration flows of young people across the country have had a considerable effect on local demographics and housing markets. Some local authorities might actually have seen declining populations during the 2000s if it weren’t for their local higher education institutions.

As the number of students grew during the late 1990s and 2000s, it was the private, typically buy-to-let, landlords who housed them. In many towns and cities, students were (and are) a significant driver of the growing private rented sector. Converting family homes into houses of multiple occupancy was an attractive proposition when you could save on your children’s rent while earning a nice income and benefiting from house price growth. Unfortunately this process led to areas of university towns and cities becoming highly concentrated with students while pricing out families looking to buy and increasingly to rent.

The purpose-built and professionally managed student accommodation sector can make a positive contribution to housing supply and ease the housing crisis in these markets. In 2014 we calculated that delivering an additional 300,000 student beds could free up 77,000 family homes in towns and cities across the UK. Although that only equates to half of one year’s new build housing supply, many of these houses are in locations where developing family housing is unviable or requires a price that is unaffordable to most.

For this approach to be successful, the newly built accommodation needs to be competitive with the private rented market. That doesn’t necessarily mean competing directly with HMOs on rents, but it does require accommodation that is affordable for the majority of students. There is growing concern about the type and affordability of accommodation from existing students and local residents.

Targeting overseas students paying high rents for en-suite studios may have proven a successful approach in recent years but there is inevitably a limit to demand for these premium products in any one market, especially given current trends on overseas student numbers.

There is clearly an opportunity for the sector to reach into the mass market by developing appropriate types of accommodation (e.g. cluster flats rather than studios) at affordable prices (e.g. competing on total living costs including bills and shorter tenancy periods). However, viability remains a barrier to increased development in many markets, and so local authorities need to recognise the opportunities offered by purpose-built accommodation through appropriate planning policies that allow developers to deliver appropriate and affordable student accommodation.

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