In the last few years, I’ve been intrigued by how changes in student housing track a broader transformation of higher education. The obvious change in the UK has been in student numbers, with major implications for the demographics of cities with major universities:
Between 1994 and 2012 the number of undergraduates in Britain grew by 45%, to 1.8m. Until recently, the housing stock changed little to accommodate them. Students clustered in neighbourhoods near universities, typically filling up old terraced houses. In Leeds, they spent much of the 2000s gradually spreading from old back-to-back houses in Hyde Park, which is near the two main universities’ campuses, into Headingley, a more middle-class district farther from the centre.
However since 2007, the number of students living in private halls of residence has more than doubled to 102,000. It has been a sustained area of growth for investors since the financial crisis, at a time when comparable investment categories have decelerated, with private sector investment estimated to have grown from £350m in 2009 to £2.1 billion in 2013. The growth since then has been even more substantial:
The UK purpose-built student accommodation market is estimated by Knight Frank to be worth £46bn and new developments completed this year are expected to total a record £4.7bn.
Last year, £3.1bn worth of student halls were sold – more than double the amount traded in 2013 and 2014. All five of the biggest deals – worth a combined £1.5bn – were sold to overseas investors. The largest transaction was the purchase by the property arm of Temasek, the Singapore state investment fund, of a portfolio of 25 student buildings in several cities including London and Manchester.
There are many factors which seem to be at work here:
- opening up a new category of luxury accomodation for students whose ‘needs’ were unmet by previous housing regimes
- depending on specific factors of the student experience (possible atomisation, relative privilege, informational disadvantage etc) to extract higher rents than would be possible through the wider lettings market
- student numbers increasing faster than universities can invest in infrastructure to house them
- the ‘unbundling’ of the university and the opportunities created for private providers when they lessen their commitment to student services
- the opportunity hoarding of the middle class under conditions of austerity & the transfer of parental resources into ensuring an effective student experience
- the appeal of a relatively buoyant asset class in a wider context of declining returns
However the one which interests me most is what this suggests about the future of higher education. It is being evaluated as one of the most reliable institutional areas in which to invest, in the sense that student numbers are expected to grow. But what are the aggregate consequences of these changes likely to be for higher education? Could this emerging political economy of student housing generate unintended consequences which act back on the sector itself?
Categories: Higher Education