Serious shortage in student accommodation provides real opportunity for landlords

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While there has been a shortage of all types of rental accommodation across the UK for several years now, the student market has been hit particularly hard. There is currently a shortfall of over 200,000 beds, which is expected to grow to around 450,000 by 2025. This is thanks to rising student numbers and a slowing in the supply of new student housing.

Although delivery was increasing up to 2019, the pandemic hit the industry hard, with around 22,000 new beds delivered in 2021 and just 15,000 in 2022.

A National Student Accommodation survey, published by Save the Student in February, revealed that 50% of students surveyed are worried about the housing shortage.

So which locations are particularly struggling?

Manchester is one of the hardest hit student cities, with a shortfall of around 4,000 beds for the current academic year. Students enrolling at Manchester University back in September 2022 were being offered £2,500 to live off-campus, with contingency accommodation secured in Preston and Liverpool.

Elsewhere, some of those studying in Bristol were expected to travel from as far away as Cardiff, while the University of Glasgow was telling new students that it could not guarantee them accommodation and that anyone living within commuting distance would be automatically rejected for a place in halls.

In Durham, hundreds of students queued outside letting agents overnight at the end of October last year, in order to secure accommodation for the 2023/24 academic year when it was released, with some signing contracts without even viewing the property. A local letting agent explained, “Durham Council will only let around 10% of houses in a certain area be converted into student housing – so we have run out of properties.”

A real opportunity for landlords

While more purpose-built student accommodation is certainly required to house first-year undergraduates, there’s also a huge need for more private rented housing. This presents a real opportunity for landlords to invest in HMOs for students. If you haven’t considered this type of rental, here are three reasons why student HMOs can be a great investment:

  • Yields are usually higher than for standard lets. Even though maintenance and management costs are higher, charging on a price-per-room basis brings in much more rental income than you’d get from letting the property to one household.
  • You very rarely have a void period. With high numbers of new students entering the market every year, there’s consistently strong demand and although the academic year tends to run September to July, it’s common practice for students to sign a 12-month rental contract. And because students tend to plan ahead for their next year’s accommodation you usually have new tenants signed up well in advance.
  • The rental income is usually pretty secure. Student tenants are generally reliable when it comes to paying rent – they tend to have grants, part-time jobs or parents helping them out. Landlords usually make the students jointly and severally liable for the total property rent, so if one leaves or doesn’t pay, the rest have to make up their share. And for an extra layer of financial protection, you can also ask their parents to act as guarantors.

To find out about student demand in your area and discuss what investment opportunities there may be for you, get in touch with your local Leaders branch and one of our team will be very happy to help.

4 COMMENTS

  1. I invested in student accommodation 10 years ago. Never been happier. Generally everyone is respectful, my neighbours have my number, they’ve never needed to call re antisocial behaviour etc…

    They’re just not very clean. Bit of bleach down the toilet wouldn’t go a miss from time to time etc… oh and the old, my bulb isn’t working, can you send an engineer email… seriously, these kids aren’t equipped for basic life skills but they’re good kids.

  2. I have been a landlord in Durham for 20 years and have mainly rented out 1 and 2 bed flats to both undergrads and postgrad students. I have had PhD students stay for 3, 4 or even 5 years. Never had any real issues with students though the occasional non-students I have let out to has been another story. The thing about students (well the ones at Durham, anyway) is that can and do read stuff they get sent. I have been issuing generic cleaning instructions for the last 15 years or so and this does make a difference when it comes to the end of the tenancy.

    As Peter says, they are generally good kids, though I’d advise against letting out a large HMO to half of the university or college rugby team.

    As to the comments in the article about Durham: Durham markets itself as a collegiate university – a sort of poor-academics Oxford or Cambridge. As a result, all first year undergrads are given a place in college but are made quickly aware that they will need to move out of college in their second year (and with a good chance of not getting back in for the third year). Each year, the new first years start househunting for their second year almost as soon as they arrive in Durham – all that happened this year was that househunting started about 3 or 4 weeks earlier than usual. The 10% limit was belatedly brought in by Durham County Council through an Article 4 direction several years ago, though the council’s critics would say that it was a case of locking the stable door after the horse had bolted as, by then, huge swathes of the city centre’s terraced housing had been given over to PRS student accommodation.

  3. The article does not address the problems which student landlords will face when the Renters (Reform) Bill abolishes fixed term tenancies and allows students to leave at any time. Perhaps the overall shortage will mean that any vacancies are snapped up but that’s a bit of a gamble.

  4. The last thing any LL should be investing in is student accommodation.

    Get out of student accommodation more like.

    Most student accommodation doesn’t comply with EPC C status.

    Such properties should be sold off.

    Rarely would it be worthwhile endeavouring to comply with EPC C status.

    There are apparently about 2.9 million letting properties that aren’t EPC C compliant

    A lit of these are student properties.

    Student LL would be wise to sell off their student properties.

    It seems unlikely that Govt in the RRB will give private student LL the same facilities as PBSA.

    This effectively makes student accommodation unviable.

    Where this leaves all the students God only knows!!

    There will be a substantial reduction in student properties in the next two years.

    If students believe things are difficult now they ain’t seen nothing yet!

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