The quest for affordable and accessible student accommodation: challenges and perspectives

The following is a guest post from Thomas Storgaard, a partner in the Property Team at Bridges Fund Management. Bridges is a Certified B Corporation that invests in needs-driven growth sectors that support the decarbonisation of the built environment.

In England, there's an annual shortfall of over 300,000 homes. Spain needs over 800,000 new homes by 2027, France requires 500,000 new homes annually, and similar situations exist elsewhere.

These statistics underscore the scale of the housing challenge across Europe, complicated by interconnected barriers in policy and planning frameworks, land suitability, and risk-willing capital allocation.

For a generation whose hopes are increasingly shaped by access to both education and affordable housing, understanding these systemic obstacles alongside developing evidence-based, innovative solutions is therefore paramount.

The growing demand for student accommodation

Student accommodation faces similar challenges. According to a recent European PBSA Investing in the Future report by JLL, Europe’s student population is expected to grow by 10% by 2030/31, reaching 23.5 million, with half being international students.

Currently, just over two million purpose-built student accommodation (PBSA) beds serve less than 10% of the overall student population, leaving most dependent on private rentals or living at home.

The current PBSA shortage is estimated to be more than three million beds across Europe, and the current development pipeline will only meet 10% of the unmet demand once delivered. Addressing this gap will require an estimated €450 billion.

Rising rents and student debt

Amid this backdrop, student housing operators have steadily increased rents, most recently with an 11% rise in 2023/24, while maintaining full occupancy. As a result, affordability has hit critical levels for students already burdened by rising living costs.

Housing is considered "affordable" if it consumes no more than 30% of a household's gross income. However, according to data from Eurostudent, students spend 40–50% of their budget on accommodation, which would categorise them as "severely cost-burdened" according to traditional affordability benchmarks.

It comes as little surprise that average student debt upon graduation has been rising across Europe. Graduates from English universities hold the dubious distinction of being the most indebted, incurring an average of £44,940 in student debt in 2023—a 141% increase over a decade.

Systemic barriers to development

At the heart of the student housing crisis lies a fundamental supply-demand imbalance. While the disequilibrium is exacerbated by several factors, the housing crisis is deeply rooted in systemic inefficiencies that extend beyond mere financial constraints.

One of the most significant obstacles to addressing housing shortages is the protracted timeline from the commencement of the planning journey to the completion of development. It is not uncommon for the entire journey to span close to a decade.

This slow development cycle reflects policy shortcomings rather than market failure. Prolonged development periods increase costs and amplify risks for developers and investors. Private capital must play a pivotal role in addressing the student housing crisis.

To attract it, establishing a responsive and predictable regulatory environment is essential; otherwise, investment will be deterred, consequently worsening housing shortages.

Unlocking value with innovation and sustainability

Among private market participants, there is an urgent need for developers and investors to embrace innovation and sustainability as a way to unlock value. The real estate and construction sectors have delivered underwhelming productivity improvements for decades, leading to inefficiencies and significant environmental impacts.

A long-term strategy focusing on creating circular, low-carbon buildings through the adoption of new technologies and methodologies can optimise operational efficiency and tenant comfort, leading to the creation of resilient and sustainable communities.

From an operational perspective, there is a need for the continued evolution of the PBSA product. Developers and operators have successfully created amenity-rich environments that prioritise the student experience, which according to PATRIZIA's Residential Insights Report 2024, has contributed to the sector's growing popularity among institutional investors.

Going forward, operators and investors should focus on developing inclusive, accessible student housing that caters to a diverse population at varied price points, achievable through a scaled back offering with fewer amenity spaces.

For additional background, please see:

• "The three persistent themes in student accommodation: affordability, availability, and accountability"
• "Better living and social environments for students linked to better mental health"
• "Quarterly survey finds rents for student housing in Europe increasing ahead of new academic year"