Purpose-built student accommodation (PBSA) should provide an invaluable resource to the higher education institution (HEI) it intends to serve, and also support students by providing a safe and secure environment which is located close to lectures and local amenities. The situation, following the global pandemic over the last twelve months, has been unprecedented and has demonstrated the value of high-quality student accommodation.

Research suggests that, in comparison to the house in multiple occupation (HMO) rental market, the PBSA sector has handled the challenges that COVID-19 has presented in a more effective way. This highlights the benefits of PBSA as professionally managed, high-quality purpose-built housing, compared to the traditional ‘student house share’ model of an HMO. 

As a result of the COVID-19 pandemic, we have also seen a considerable increase in online learning, which could result in student’s attitudes towards accommodation changing. If the future is a blend of online and in-person tutoring, more time would be spent in student accommodation. Historically, poorer quality PBSA from past years, or traditional HMOs, have created many negative perceptions of the sector, which the development industry has found hard to shake off.

With tuition fees up to £9,250 per annum for domestic students and potentially up to an eye-watering £38,000 per annum for international students, PBSA providers continue to evolve their product to respond to the needs of more discerning students. Providers are often also acutely aware of local community concerns.  

There remains apprehension for many local communities, with the ‘town vs. gown’ argument playing out on local and site-specific problems, for example: scale and design; amenity issues such as parking; inclusivity and affordability; and wider pressures on the local housing market. Arguably, repurposing student HMOs could reduce demand on existing housing stock. Yet, it is unclear whether local landlords would be happy to convert their properties back into family accommodation, alternatively they may look to move into other sectors to fill their bedspaces. 

Due to the pandemic, the actual demand for student accommodation need to serve HEIs has become less clear. Many local councillors, who ultimately make local planning decisions, have a perception of limited future need for PBSA, yet student numbers and wider growth of HEIs contest this theory. The growth in student numbers, already seen from UCAS, follows countercyclical economic trends where student numbers increase rapidly when employment opportunities are scarcer. This makes the need for high-quality PBSA even more pressing over coming years as the UK battles through both the fallout of Brexit and the COVID-19 pandemic.

Each Local Planning Authority (LPA) that has a large university presence must wrestle with these pressures, which in some instances have resulted in several draconian planning policies.

 

Issues affecting the PBSA sector

COVID-19 has caused uncertainty across almost every sector. Whilst the figures indicate that applications for university have actually increased over the pandemic, we have seen some caution from planning committees when determining PBSA schemes. 

In a recent appeal decision in Bath, the inspector acknowledged it was difficult to predict the effects of the COVID-19 pandemic on the future need for PBSA. However, it was concluded that the matter needed to be considered over the lifetime of the development rather than just at this current time. Given that it was highly likely there would continue be strong demand for future student accommodation, the appeal was allowed.

In another case, Birmingham City Council officers requested an updated Student Needs Assessment be undertaken at the reserved matters stage when granting permission for an outline application in Digbeth, due to “the unknown impacts of COVID-19”. Birmingham has since published their latest annual student accommodation need figures identifying a shortfall of over 12,000 bed spaces. Based on recent decisions, Birmingham’s elected members appear to have accepted this position on new PBSA developments coming forward.

The provision of PBSA could enable the re-purposing of existing HMOs to reduce demand on existing housing stock in many of the UK’s city centres. Whilst the argument is often put forward that student accommodation could be converted back into family housing, HMO landlords may find it more economical to maintain their HMO portfolio and choose to provide accommodation beyond the student market. For example, they could look to offer temporary housing for people with more complex needs. There are no planning mechanisms to control this process, which could cause greater concern to local residents and is a symptom of a wider lack of affordable and specialist housing provision.

Student Priorities:

Digital learning– The value of an immersive experience of university cannot be replaced, however the delivery of online learning is likely to become a permanent feature of university life.

Quality– Students want value for money and quality accommodation if they are to adopt remote-working practices.

Wellbeing – Trends seem to be moving away from studio-led schemes tied to affordability. There appears to be an increase in spaces which provide opportunity for social interaction.

Mixed communities– This involves creating opportunities to encourage student retention in cities, including the introduction of co-living and offering of wider facilities.

City life- Almost 40% of final year students intend to stay in the city they studied in after graduation. High-quality purpose-built rental accommodation is an opportunity for PBSA developers to move into the wider build to rent market or offer a co-living product to provide for graduates taking their first step into employment.

Affordable Housing requirements
A number of local authorities have specific policies for PBSA which vary in restrictiveness. Some, such as London’s new Plan which was published in March 2021, now require affordable student accommodation of up to 50% (where the development is on public land or industrial land appropriate for residential uses). 

The London Plan defines affordable student accommodation as “a PBSA bedroom that is provided at a rental cost for the academic year equal to or below 55% 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.”

Nottingham’s recently adopted Affordable Housing Contributions from PBSA document (2021) requires a contribution of £43,877 per PBSA unit. This equates to either 10% or 20% of total units on schemes over 50 beds and is subject to viability testing. Rather than providing a sum towards affordable PBSA space, the policy intends to provide further contributions to meet the city’s wider affordable housing needs. Interestingly, PBSA considered to be ‘on campus’ is exempt from these contributions.

As we experience Local Authorities increasingly requesting affordable accommodation provisions for student accommodation, they will need to be mindful of the viability of schemes where the income stream for developers is based on annual rental return as opposed to selling an end product, similar to the build to rent market. 

Arguably, Local Authorities should be seeking to meet affordable housing targets through traditional market housing and not relying on PBSA, considering the positive impact schemes can have on alleviating housing pressures in city centres.

Location specific policies
Locational factors often form a key plank in planning policies for PBSA. Reading’s established PBSA policy, restricting PBSA to sites either on or adjacent to campus, was tested at appeal in November 2020. The dismissal of this appeal for a site already allocated for residential development, despite the inspector confirming need for PBSA, effectively further endorses the restrictive sequential site policy for PBSA adopted by the council.  

Leicester City Council’s current draft Local Plan looks to encourage PBSA in sustainable locations close to HEIs in the city, but not within areas which have Article 4 restrictions in place preventing changes of use from dwellings to small HMOs. On the face of it, this appears counterintuitive, as the Article 4 locations are close to both Leicester and De Montfort universities and well-managed PBSA.

What is clear from just these two examples is that the PBSA development community should provide more of an active voice in shaping the development plan documents, so that the positives associated with PBSA are clearly balanced by an inspector in adopting new development plans.

National picture, international students and projected growth

Nationally, full-time (first degree) student numbers have increased by 138,675 (8%) in the period from 2015 to 2020. Importantly, despite COVID-19, international demand for UK student accommodation remains strong from students and investors alike.

The number of new applicants between when lockdown measures were first announced on 23 March 2020 and 30 June 2020 was 17% higher than in the same period in 2019. The increase was 30% for home students, also including an increase in mature applicants. This suggests that the pandemic enhanced the number of people applying to university, which is consistent with the suggested theory that demand for university places tends to rise when there are more limited employment opportunities.

International UCAS Applicants for 2020 were up by a record 3.2% on the previous year. There was concern that limits on travel and the type of teaching possible with coronavirus restrictions would lead to a large drop in student numbers, yet this has not been the case. Overall, applications from home students were up by 2.1%, those from the EU were down by 0.4% and those from other overseas students were up by 12.3%.

Research released in October 2020 by StuRents revealed that the UK PBSA sector grew by a net increase of 2.6% in 2020 with more than 25,000 new beds coming to the UK market.

Results from the National Student Accommodation Survey 2021 indicate average rent for student accommodation now stands at £146 per week. The below map outlines the average rent for the different regions of the UK.

About PBSA

  • PBSA now accounts for over 34% of the total bedspaces that serve the 1.89 million full-time students in the UK. This is characteristically split into three elements, as outlined by the graph below: 
  • In the above graph, privately operated PBSA is also further segmented depending on a number of factors, for example target student market, HEI, product offer and price point. Therefore a ‘one size fits all’ approach to PBSA should be treated with caution.
  • The remaining 1.23 million bed spaces for full-time students are typically provided by HMOs or by students living at home. As this article considers, HMOs impact on the permanent local communities around universities. PBSA is often, but not always, placed within a rump ‘student sector’ and seen by LPAs as a difficult use class. However, this should not be the case. PBSA should provide a safe, secure environment for students and be well-managed by PBSA operators. This counteracts the potentially unmanaged nature of HMOs and the associated local housing and amenity issues which these often present. There are also other benefits to local communities as a result of PBSA, for example direct investment, which creates new jobs and often provides funds via planning obligations to improve the local environment. 

What is next for the PBSA sector?

Emerging from COVID-19, the PBSA sector remains buoyant as student numbers across the UK continue to increase. With HEIs seen to be key drivers of economic growth and innovation in the towns and cities they serve, it is paramount that the benefits of well designed, safe and well managed PBSA are identified as a means to support the offer of HEIs and meet student requirements. 

For PBSA to be embraced by elected officials and local community groups, the perceived amenity issues associated with over-concentration HMOs in university towns and cities need to be clearly separated from the sector.

Why choose Carter Jonas to provide PBSA advice? 

With over 800 property professionals and a network of offices across the country, we are well placed to provide specific local planning advice and commercial market intelligence on PBSA. For further information on the sector, or to discuss your PBSA requirements, please contact us.

Article sources:
Bonard, HESA, Commonslibrary.parliament.uk, Save the Student, StuRents

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Neal Allcock
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Neal Allcock is a partner and joined Carter Jonas in January 2021 as head of the firm’s Midlands planning team, based in the Birmingham office. A specialist in large-scale projects and urban redevelopment and regeneration, Neal has delivered a number of strategic development projects for a variety of clients. With over 15 years of planning experience including at urban and rural local planning authorities, Neal has extensive and varied knowledge of projects across residential (including BTR and PBSA), infrastructure, retail and commercial/industrial sectors.

Neal advises clients on a diverse range of planning matters across the region including tall buildings, town centre regeneration, brownfield redevelopment and green belt proposals. He provides strategy on the planning approach for complex major development projects, preparation and submission of planning applications and representations to promote sites through the local plan process.

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