The London Plan (“the Plan”) adopted in March 2021 recognised the importance of Purpose Built Student Accommodation (PBSA) to the capital and placed conditions on its future development, positioning universities and affordability at the heart of a new planning process. Three years on, has it delivered its core objective of delivering much-needed additional student housing in the capital – 35% of it affordable?
Looking at planning submission and related data to better understand the emerging themes, QX Global and CBRE this week issued a major report examining London’s PBSA development pipeline. What is being delivered and where, how much is policy compliant and, more importantly, is the development pipeline meeting demand?
Policy Recap
Policy H15 in the Plan aimed to promote the development of more affordable PBSA. Its publication in March 2021 was an important milestone for planning and development within the capital, setting ambitious targets for housing delivery, including a new framework for the supply of PBSA. The central policy plank was that future student housing development should have a minimum 35% affordable rooms, with rents not exceeding 55% of the maximum London student loan (£188 per week in the 2023/24 academic year over 38 weeks). Additionally, the majority of beds should be contracted under a nomination agreement to one or more universities, including all the affordable bed spaces.
Student Numbers
With over 50 universities and four in the global top 50, London occupies a unique space in global higher education, highlighting why planning policy around the provision of student beds is so important. According to the most recently available Higher Education Statistics Agency (HESA) figures, 400,000 full-time students were studying in London in 2021/22. In reality, given the HESA data lag and its exclusion of most private universities, that figure probably exceeds 500,000 today. To give further context, the total London full-time student population increased by over 75,000 in just five years to 2021/22, a rate equivalent to adding all of Manchester’s full-time students. These students presently share circa 100,000 university and privately owned PBSA beds.
Post-Plan
So what has been delivered?
The analysis indicates a London ‘demand pool’ (students not living at home, in their own home or on placement) of around 200,000. Post-Plan, 12,000 beds have received planning consent, including 3,100 affordable beds, broadly in line with the Greater London Authority’s (GLA) 3,500 per annum target. However, annualised growth over the period 2017 to 2028 is just 2,800 per annum, well below a target that is now widely accepted as understated. In Westminster, Camden, Islington and Tower Hamlets, where 60% of London’s students study, just 1,300 new beds have received approval. Further crunching the data shows over 111,000 students are currently guaranteed accommodation by their university (CBRE Research), more than the total beds available. No returning students would be able to reside in PBSA if every student took up this guarantee. As demand continues to outstrip supply, we may see more universities follow UCL’s lead and replace such housing guarantees with ‘priority groups’ despite the potential impacts on recruitment.
Why so little growth?
More than 20 of London’s boroughs have varied the Plan to suit local need, adding complexity and stifling development. With the affordable bed rents pegged to the maximum London student loan, viability becomes extremely challenging for PBSA developers. The rent-controlled rooms must be priced the same in Mayfair and Merton, driving such development as there is to outer London. The requirement for university support further compounds the problem of dwindling growth. We should be unsurprised, in the current tough funding and volatile international student policy environments, that few universities choose to commit. Planning data shows only 15 institutions have supported applications in the capital, of which only three are former polytechnics. The ‘big four’ of Imperial, LSE, Kings and UCL, who have the biggest balance sheets, dominate the pipeline.
What about other student housing?
The argument is often made that most London students live at home or rent houses. This is true but demand for houses in multiple occupancy (HMOs), the private rented sector (PRS) and build-to-rent (BTR) has also continued to grow, pushing up rents as they compete with other segments of society for scarce accommodation. The number of HMOs has decreased by 43% (CBRE Research) in the last five years and 20% of BTR housing is now occupied by students. Should the Renters Reform Bill pass into law, students will be able to give notice at four months and quit after six. Research by student housing charity Unipol suggests this will further drive buy to let landlords from the market. In short, there is a near-perfect storm in terms of tightening supply in the capital across all student housing types.
Conclusions
The GLA is yet to issue its long-awaited London Plan Guidance (PBSA), a process designed to review and refine the workings of the Plan. This received a number of positive policy revision ideas from universities, developers and PBSA operators. The capital’s poorly served student body will hope these are taken up. If London is to remain a world-class destination for higher education students, the GLA needs to promote the rapid acceleration of new PBSA supply to support it.
