Charles Wright: Pros and cons of London’s student accommodation boom

Charles Wright: Pros and cons of London’s student accommodation boom

House building may be stuttering, but purpose-built student accommodation seems to be springing up across the city. Planning applications for student schemes have “skyrocketed” post-Covid, and that trend is set to continue, according to recent research by property consultancy Turley.

In November, a 27-storey tower block scheme by Deptford Creek for 414 student rooms received a green light, Tottenham Hotspur football club won permission for a six-storey 287-room student block up the road from its stadium, and a 34-storey 688-room scheme was approved near Old Kent Road. Other such developments in the pipeline include 185 student rooms near the Oval on Kennington Lane, a 24-storey tower by Elephant and Castle, and one of similar size at Tottenham Hale.

All of these purpose-built projects are replacing unimplemented plans for conventional housing: 129 “build to rent” homes at Deptford Creek, 72 flats near the Spurs ground and 219 originally scheduled on the Old Kent Road site. A 116-home plan on Kennington Lane and a “co-living” apartment scheme at the Tottenham Hale site did not proceed either.

In fact, according to Turley, some 30 per cent of the major student schemes approved in London since 2020 had an existing unimplemented permission on their site, most commonly for housing. So, what’s going on? Is this burgeoning number of student dwellings crowding out much-needed new homes for others, even as the city’s housing supply shortage reaches crisis point, as critics claim?

Predictably, the answer is complex. Firstly, these relatively new additions to London’s real estate landscape are meeting a real need. The capital is suffering from “chronic under-provision” of student accommodation, Turley reports. It cites the Higher Education Statistics Agency finding that there were around 375,000 full-time students living in the capital in 2021/22, a figure that already outstrips of City Hall’s forecast of 350,000 by 2041/42. Yet during that financial year there were only some 97,000 purpose-built bedspaces.

This gap between demand and supply, coupled with difficult economic circumstances for conventional housing, such as soaring build costs and slumping sales, is creating a “compelling opportunity” for investors, according to property advisers Savills.

The Old Kent Road developers explained this to Southwark Council planners, citing viability concerns about building costs, new fire safety requirements and “slow growth of residential values” as the reason behind their switch from the residential to the currently more lucrative student market. City Hall likes purpose-built student accommodation too, for a range of reasons, and has encouraged the sector with a planning target of 3,500 extra bedspaces a year.

Attractive accommodation helps London’s universities remain competitive in a global market, while the wider city also has an interest in maintaining that pipeline of highly-qualified workers and entrepreneurs, which begins on its campuses. Students directly benefit their area too, spending locally and taking up part-time jobs.

More purpose-built accommodation also reduces pressure on the currently seriously oversubscribed and expensive private rented sector. In Southwark alone 11,000 students rent privately. Shifting some of them, the Old Kent Road developers pointed out, “will help free up much-needed family housing and contribute to meeting London’s acute affordable housing need”.

Student housing also helps larger schemes to attract investment, satisfies “mixed use” planning requirements and even cross-subsidises conventional affordable homes. Almost four in 10 of the schemes analysed by Turley included traditional residential development too. The Old Kent Road scheme will deliver 23 social rent homes, for example, while a new 621-student room proposal near Wood Green London Underground station will provide 76 affordable homes, 52 of them at social rent.

Wins all round then, for planners, developers, investors, students and others needing a roof over their hands, and for London’s neighbourhoods too? Or are there clouds on the horizon, as some observers are beginning to suggest?

New draft City Hall guidance, aimed at “aligning provision with need”, highlights some of these concerns.

One is oversupply displacing conventional housing or other important uses if demand falters, which might result from the tendency of some providers to focus on “high-end”, high rent accommodation, which contributes to the pricing out poorer students along with the increasing cost of higher education generally and new restrictions on overseas students.

Another is the possible “over-concentration” of student housing in particular areas, undermining a key City Hall planning objective to deliver “mixed and inclusive neighbourhoods”. “It is not unreasonable to try to manage this risk,” the guidance says, highlighting London Plan policies including affordable room quotas, strategies to deter over-concentration and the important requirement in new developments for “nominations agreements” with universities to take up a majority of bedspaces.

This is a mechanism which both directs new developments to where they are most needed and matches supply to student recruitment plans. And crucially, the guidance says, it should “cool down the pipeline for accommodation if it is in danger of being over-provided” but also stimulate more development if needed too.

Is that cooling imminent? At the moment the continuing and, indeed, growing gap between supply and demand looks set to keep purpose-built student accommodation popular. But developers can expect borough planners and City Hall alike to be keeping at the very least a close eye on location, affordability and demand. Consultation on the City Hall drafts closed last week and the final guidance is expected to be published in the spring.

X/Twitter: Charles Wright and OnLondon. Support and its writers for just £5 a month of £50 a year and get things for your money too. Details HERE. Photograph: LSE Centre Buildings from Turley report, provided by Westminster City Council.

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