2021 Changes, Growth and Setbacks to student accommodation in the UK Private Rented Sector.
The Private Rented Sector (PRS) has seen a rapid growth rate over the last few years. As rental prices increase so do tenants’ expectations. From a 24 hour concierge to onsite personal trainers and roof top sports courts to private dining rooms, the standard of PRS schemes is increasingly competitive especially within the student accommodation market.
As the UK’s skylines become more and more crowded with cranes how will the current climate have an impact on the housing industry and PRS as a whole with particular reference to student housing.
Restrictions on government backed schemes such as the ‘help to buy’ and the impact a recession will have on disposable income, will inevitably result in a decline in mortgaged owner occupation and higher demand in PRS.
The upcoming months could be pivotal for the UK PRS, as it seems set to capitalise on being a highly viable option for tenants in towns and cities up and down the country but as the future of university campuses has not been confirmed, the likelihood of students returning to their student homes is low - what effect will this have on the future of PRS?
The rate at which people move to the Private rented sector housing system has seen significant growth over the years. Figures from 2019 show 4.6 million people rented their apartments from a landlord. Many households are using the sector as their main housing system vs mortgaged homes, since it provides a long-term housing solution for those who don’t have mortgage affordability, or the deposit funds required to purchase a home.
Changes to PRS over the years.
The target market of PRS originally began with developers building for young professionals with an approximate age of 25-35, who are not in a financially stable position to purchases a home theirselves. Although these will likely be the primary consumers within PRS for the foreseeable, another huge area of the sector is student accommodation.
Once upon a time, students chose the cheapest shared homes a city had to offer, with first years often landing themselves a prison like cell in student halls. Fast forward to today, and student living is big business in the UK with an estimated £6 billion being invested into the student living market up and down the country each year. The competition is ripe as developers fight to be recognised as the best option for students. Being functional and design led is no longer a preference but a vital necessity. Onsite gyms, cinemas and swimming pools are just some of the features popping up in these luxury ivory towers of student accommodation.
Prominent cities such as Manchester and London have been the guinea pigs of the PRS trend, with other cities like Leeds, Liverpool and Lincoln closely following suit to put their stamp on the market with luxury student accommodation options popping up everywhere.
The impact of COVID-19 on student accommodation within PRS.
The implications of the coronavirus are far from clear. But it’s likely that it will have a long-term impact on the private rental sector (PRS). Affordability has been a huge concern before COVID-19. Almost 3 million renting households are ‘one paycheque away from losing their homes’, with private renters paying a higher proportion of their income towards their housing costs in comparison to other tenures.
The coronavirus pandemic has affected so many businesses and landlords of PRS have not been exempt during the pandemic. With 8.9 million employees furloughed at the peak of lock down 2020, it is understandable that tenants have found themselves struggling to pay rental prices with only 80% of their wages being covered by the governments job retention scheme. Not to mention businesses in the hospitality and retail sectors who could potentially have been closed for twelve months, resulting in rent payment holidays being requested from landlords as well as renters fearing eviction from their homes.
Paul Shamplina, Founder of Landlord Action states “In the residential sector the market we’ve seen most affected is the student market where you have tenants who are refusing to pay because the universities have shut down and that could be the case for another year.’
With the future of universities in the hands of the government and resting on whether the UK cases of COVID 19 can begin to reduce, many students are unsure as to whether they will return to university full stop. Online teaching has not only taught us virtually but also made us consider if we really need to attend lectures in person. “I experienced a very swift exodus of students, understandable with universities moving to no face-to-face training, and concerns about health meaning many students chose to return home to their families.” – Arden Hanley
Clear guidance for universities is vital in the upcoming months, not only for landlords who are uncertain of their income but also for students, the PRS sector may not be able to cope with an influx of students needing accommodation all at once. The sooner the guidelines can be reviewed and set-in place for the new academic year the better for everyone in the student accommodation sector. Students will understandably not want to be signing themselves up to 3–5-year leases on homes if they are going to be left empty.
Coronavirus is likely to shift tenants’ views on renting, as more of us spend time working remotely, our houses are becoming multi-functional, including being our offices, home gyms and chill out zones. City centre luxury student apartments will likely be enviable and in high demand, with many now offering workspaces within the apartment blocks as well as recreational areas, these are tempting prospects for students who are used to sitting in a small apartment staring at the same four walls. Experience focussed living will be in demand, with big names in the industry such as Iconinc stepping up their game to stand out from the crowd. ‘IconInc has grown into an award-winning brand that develops and operates in established university cities. With a vision to enhance student life experience, IconInc not only redefines student accommodation, it also generates strong, sustainable revenues.’
The future of PRS and student accommodation.
The future of most industries is uncertain as a result of Covid 19, however, there will always be a need for rental homes mainly due to the lack of disposable income of employees which means they cannot afford such large house deposits currently required for a mortgage. And provided e-learning is not a permanent thing of the future universities will likely resume normal opening hours and students will return to their studies with higher expectations from their luxury student flats than ever before.
The pandemic and the economic shock which has followed has served to expose fault lines in the UK PRS and housing system. However, there is the potential to use this experience and knowledge gained to address prominent issues, which have come into focus as a result of the turmoil caused by the pandemic. In the words of Churchill, ‘if we are to move toward a more fair and equitable society, we must alter the law and change the system.’