Demand trends
The summer recruitment round is volatile in 2023, and intake levels hard to predict. Even now, after exam results have been announced, many institutions do not have a completely clear view of the shape of their incoming cohort for the approaching academic year. This is perhaps the most uncertain cycle since full cost fees were introduced in 2012. Why?
a) In 2020, the long demographic decline in 18-year olds ended. Between 2020 and 2030, the UK population will expand by 27 per cent. This growth will include more than a million extra 18-year olds. On current admission trends, this would mean an increase of 40,000 students in England by 2025 (and a fall of around 18,000 students in Scotland). However, these rising numbers are not being reflected in the volume of applicants: in 2022/23, there was no increase in home students and UK student intake is lower now than it was in 2020. Even on a five-year trend, home undergraduate growth is not in line with those earlier expectations.
UK undergraduate applicant numbers were down significantly for a big chunk of the post-1992 sector. Many of these institutions are pinning their hopes on having a good Clearing to meet their targets. Some shortfalls in home student undergraduate numbers are being masked by substantial increases in undergraduates from overseas.
b) In the Covid-hit cycles of 2020/21 and 2021/22, a lot of higher-tariff universities experienced a spike in full-time home undergraduate intakes as a consequence of A-level grade inflation, produced by emergency changes to methods of assessment. For this segment, widespread cutbacks in admissions followed in summer 2022. In the forthcoming recruitment round, affected institutions are aiming either to keep intakes level or to pare back further. Some providers will take a view on how many loss-making undergraduates they are willing to accept, based on predictions of their international intake.
c) The Covid bulge will have largely worked through the system by the end of the 2023/24 academic year. From then on, home undergraduate numbers may fall further. At many – particularly higher-tariff – institutions, Year 1 undergraduate demand for accommodation is considerably lower than it was three years ago.
d) The main driver for growth and rising accommodation demand is international students – both undergraduates and postgraduates, but mostly postgraduates on one-year taught courses. The HESA figures are a year old, but it is likely that international student numbers increased by some 276,110 between 2019 and 2022, a 72 per cent increase over the period. Of these, 63 per cent were taught postgraduates. By definition, all international students have an accommodation need.
e) Although the rate of growth has slowed, international intakes are expected to increase significantly in line with recent trends. Student numbers from China are still rising, but more slowly, and their pattern of distribution continues to shift, as they consolidate in higher-tariff universities. Meanwhile, in the postgraduate taught segment, the HESA figures show major growth in students from India and Nigeria, concentrated in post-1992 lower- and middle-tariff institutions.
Recent changes to the Nigeria Form A currency approval process are adding to the cost of study in the UK. There is some evidence that this has acted as a drag on growth in Nigerian students at some institutions. Students from overseas are also having to begin to factor in increases in visa fees and the healthcare surcharge (apparently to help fund the pay rise for doctors).
f) The number of international students arriving with dependents and entering the non-student housing market rose significantly in 2021/22 and 2022/23. The Government has reacted by restricting visas for family members accompanying students from January 2024. However, the volume of international applications appears not to have been affected by this policy change: there has been no surge in applications ahead of the restrictions coming into force in January and interest in Semester 2 intakes for 2024 remains high.
So, there are lots of moving parts: uncertainty about the level of home student admissions; uncertainty about how many internationals are actually going to arrive; uncertainty over the changing balance between different cohorts of international students; and greater than normal uncertainty over Clearing.
The standard institutional accommodation commitment – sometimes called an accommodation guarantee – has been to provide beds for full-time Year 1 undergraduates, and this is still the case. The institutional accommodation offer to postgraduates remains limited and the majority of international postgraduates are signposted to other suppliers of purpose-built student accommodation (PBSA). In a CUBO survey of 30 institutions in July 2023, 62 per cent of respondents said they were not offering a guarantee of accommodation for postgraduates.
In summer 2023, nearly all PBSA has been let before postgraduates are due to enter the market. The Evening Standard reported on 10 July that:
Students could be in for a major housing crisis in the year ahead as university accommodation provider Unite says its properties are already 98% sold, two months before the academic year gets underway.
It is also difficult to know the extent to which postgraduate students from Nigeria and India can afford to rent traditional PBSA stock, as they are generally looking for considerably lower-cost accommodation than much of the PBSA sector currently provides.
There is evidence that some international students are using family links and other contacts to secure more informal and low-cost accommodation options. Some live away from their place of study and commute in when necessary. For example, there are reports of students in Manchester living in Liverpool and Huddersfield and of students commuting between Leeds and Birmingham.
High volatility in the international postgraduate market makes many institutions reluctant to take the risk of underwriting rooms for overseas students, because they may be left holding expensive voids. Supply
Bed space growth in PBSA has slowed over the past four years. Between 2010 and 2020, new bed spaces increased consistently by around 30,000 a year. Collectively, the number of university-owned bed spaces has remained static. Figures from the Unipol/ANUK National Code for the private sector (where almost all the growth is to be found) chart the slowdown:
- 2020 – 29,048
- 2021 – 18,737
- 2022 – 14,551
- 2023 – 13,543.
Furthermore, in 2023 barely 9,000 of the 13,543 beds are actually new. The rest are beds returning to the PBSA stock, having previously been taken out of commission either for refurbishment or for building remedial works. For 2024, it is already known that the number of wholly new beds will again be under 10,000.
Looking at the number of PBSA planning permissions can be an unreliable predictor of future supply. Unless there is currently a ‘spade in the ground’, actual building is unlikely to happen: developers are struggling to maintain viability because of volatile build and funding costs. Unipol expects a virtual standstill in new provision for summers 2025 and 2026.
For developers, new-build prices (including associated costs) are currently averaging over £100k a bed space outside London, compared to around £70K two years ago.
Manor Bank, Newcastle-upon-Tyne (Unite Students)
Although national data are difficult to come by, most education institutions are reporting some loss of stock in their traditional student housing market in smaller on-street houses supplied by local landlords. Properties are either leaving the market or moving to professional renting. These shifts are particularly noticeable where other rented housing markets or tourist (Airbnb) markets are strong. In areas with student housing surpluses (such as Leicester), smaller houses are also returning to traditional owner-occupation.
At the same time, there is evidence that students are living in more non-student city centre flats. This coincides with the growing popularity of shared professional lets in traditional houses, as young professionals move on from, or decide they cannot afford, the café/bar lifestyle associated with city centre living.
A major plank of the Government’s Renters (Reform) Bill is the proposed abolition of the fixed-term Assured Shorthold Tenancy used by students in on-street housing, and its replacement with open-ended Assured Tenancies, which would provide security of tenure and the right to give two months’ notice at any stage in the tenancy. If implemented, this change would fundamentally disrupt the alignment of academic and letting years and, in so doing, undermine the business model used by student landlords. For these reasons, the Bill has already played a part in speeding up the contraction of on-street student housing. In Scotland, similar reforms have already been implemented, resulting in a major loss of on-street student accommodation.
Over the last couple of years, the Department for Levelling up, Housing & Communities (DLUHC) has received representations from the HE sector bodies about how these changes would badly disrupt the student housing market and reduce affordable supply. Notwithstanding the robustness of the lobby, the most recent ministerial response was this:
I want to assure you that I am continuing to consider how we can best support the sector so that our reforms work for both landlords and students. When we legislate, we will also allow time for a smooth transition to the new system.
No mention of the educational impact the legislation would have in its current form – which reflects a consistent attempt to paint these issues as landlord versus student tenant.
Accommodation shortages
It is always more useful to look at housing shortages by host town/city rather than by individual institutions within those areas, because housing markets often span several HE providers.
Last year, there were significant housing shortages for students in Brighton, Bristol, Durham, Glasgow, Manchester and York. These are set to worsen in 2023. The possible exception is Brighton where there may be some easing of demand, as intakes have fallen.
In these locations, growth in PBSA supply is, at best, marginal and unlikely to dent existing shortages:
- Bristol +24 additional bed spaces
- Brighton +60
- Durham 0
- Glasgow 0
- Manchester +457
- York +81
Predicting supply gaps in such a volatile environment is complex. However, based on intake growth patterns in 2022/23, Unipol expects to see shortages over summer 2023 in:
- Bath (0 additional PBSA bed spaces)
- Cambridge (+133)
- Cardiff (0)
- Edinburgh (+1,550)
- Lincoln (0)
- Salford (0)
Of these, only Edinburgh has had a significant increase in supply. Coupled with level intake – growth in international postgraduates will be matched by a fall in undergraduates – the extra beds here may produce a slight easing of the city’s current shortage but there will still be a shortage.
On top of these anticipated supply deficits, Unipol has designated the following as ‘amber’ risks, where shortages could easily occur if intake over summer 2023 is strong:
- Aston (0 additional PBSA bed spaces)
- Anglia Ruskin (0)
- Cardiff (0)
- Birmingham (+865)
- Bournemouth (+206)
- Canterbury (0)
- Huddersfield (+405)
- Leeds (+2,031)
- Liverpool (+1,099)
- Newcastle (+314)
- Portsmouth (+123)
Some of these markets are clearly linked: Salford/Manchester, Aston/Birmingham, Cambridge University/Anglia Ruskin and even Huddersfield/Manchester. Growth of PBSA bed spaces in Leeds and Liverpool may result in a tight market rather than a shortage.
London is always in a housing shortage. However, because postgraduates form a higher than national proportion of students (34 per cent) and higher numbers of home commuter students than average, international students account for 67 per cent of housing need. Between 2015/16 and 2019/20, the UK as a whole grew by a bigger percentage in each cycle than London, but in the two most recent cycles, London has outstripped nationwide increases – by 2.7 percentage points in 2020/21. The number of new PBSA beds has reduced significantly from 3,655 in 2021 to 2,622 in 2022 and is down to 537 in 2023.
As in the general housing market in London, those who can afford high rents will find a place to live, but there will be shortages for undergraduates and some international students who are on a budget and looking for more affordable accommodation.
The number of institutions listed as having a shortage or a potential shortage is consistent with an earlier CUBO survey. This found that 45 per cent of respondents believed they could end up with a gap in supply, and 23 per cent of these thought it could be marginal (200+ rooms).
Although limited, growth in PBSA bed spaces is continuing in places where there is already an adequate supply:
- in Coventry there will be an extra 1,136 beds in 2023/24 in a market that already has a surplus estimated at 6,000; and
- in Nottingham an additional 1,632 beds are set to enter a market where there is already enough supply – although the surfeit may come into play if the University of Nottingham goes ahead and takes out a number of their beds for refurbishment in 2024.
Future work
It is important to try to gather better information on where international students are living (if not in PBSA) and to establish how the cost of student accommodation has changed in the context of hikes in utility costs and steep inflation. Unipol is currently undertaking two pieces of research:
a) International students
Over the last year, Unipol has taken a keen interest in understanding how the accommodation sector has been affected by big increases in international taught postgraduate students – particularly incoming Indian and Nigerian students, who are more likely to bring dependents and who are often looking for lower-cost housing options. Significant numbers have reported challenges in finding somewhere appropriate to live. Many of these are in temporary accommodation, an arrangement that adversely affects their studies and impedes access to other services.
This research will provide useful evidence of any challenges students are facing across the country – evidence that will enable institutions both to improve their communications to incoming students and to understand what support current students need.
Unipol is working with m.e.l research to better understand the experiences of international students. It includes a focus on their entry point (September or January intake) to determine if there are any notable differences in their experiences. Both undergraduate and postgraduates have been encouraged to take part. The research is investigating the following areas:
- pre-arrival and challenges with finding accommodation (the effect of shortages and affordability);
- challenges facing students with dependents (family and childcare);
- current living arrangements (temporary or permanent for their period of study) and types of accommodation;
- how many students are having to commute significant distances as a result of local shortages ; and
- part-time working and finances.
The survey stage of the research ran until the end of July and 3,671 responses were received from the 14 participating universities:
- Anglia Ruskin University
- Bournemouth University
- De Montfort University
- Greenwich University
- Loughborough University
- Nottingham Trent University
- Sheffield Hallam University
- University of Bradford
- University of Essex
- University of Glasgow
- University of Leeds
- University of Leicester
- University of Manchester
- University of Nottingham
- University of Sheffield.
b) Rents in PBSA
In association with the NUS, Unipol runs a three-yearly survey that looks at the cost of PBSA accommodation. The next full iteration will be in summer 2024, but a mini-survey is being conducted this summer as a one-off, prompted by the unprecedented volatility in rent levels. This intercalated exercise covers the following cities:
- Bournemouth
- Bristol
- Cardiff
- Exeter
- Glasgow
- Leeds
- Liverpool
- Nottingham
- Portsmouth
- Sheffield.
The fieldwork is running over the summer and its results will be reported in mid-October 2023. The early sense is that rents have increased by around 25 per cent across the two-year period 2022/23 to 2023/24.
Be wary of industry projections of the number of PBSA bed spaces required
There is a slew of estimates of the number of PBSA bed spaces needed to meet student demand. These normally come from industry-led or developer perspectives. For example, a Knight Frank UP student market update predicts a 16 per cent increase, or 263,000 bed spaces needed by the end of the decade. This would require much faster growth than occurred at the peak of construction across 2009 to 2019. Little evidence is adduced to support this conclusion, which is made on the basis of ‘our modelling’.
Many such projections underestimate the growth in home commuter students and the slowdown in home undergraduate applicants. Most importantly, they wrongly assume that high international growth from India and Nigeria will simply slot into the same type of accommodation developed for the better-off Chinese segment.
Conclusion
For many students – particularly those last in the queue – this will be a difficult year to find affordable housing. In some cases, supply will simply dry up. Having learned lessons from last year’s problems, a lot of institutions are better equipped to assist their students through this difficult experience. However, student services are not magicians. The terrain is rough: higher prices; real-terms decline in maintenance loans and fees; greater numbers of international students on a budget; tightening supply; volatile intakes; and an unhelpful Government. Staff could be excused for feeling the odds are stacked against the people they are trying to help.
