COVID-19 – Could temporary change of use ease student accommodation providers’ woes?

Since the cessation of all face-to-face teaching across the UK as a result of the Coronavirus outbreak, student accommodation providers have found themselves in a potentially dire situation.

Some university residences, be that halls or private rented accommodation, have remained open following government advice for students to stay put while the current restrictions remain in force, albeit with limited on-site facilities. However, many purpose built student accommodation (PBSA) providers have been forced to release students from their contracts several months ahead of the end of the academic year, sending vacancy rates soaring and rents plummeting. This has the potential to have significant ramifications for those providers whose economic margins are already being challenged.

With UK universities set to witness a further slump in student intakes this September as the global effects of the pandemic continue to play out, forcing some institutions to contemplate pushing the new academic year back to January 2021, the future looks decidedly bleak.

However, in a bid to combat the decline in demand and lost income, Lambert Smith Hampton (LSH) is advising multiple clients on repurposing existing accommodation into space aimed at young professionals, akin to the Build to Rent (BtR) or serviced apartment models, where the sector is currently flying.

Other potential alternative users could include a mix of private residents and key workers, particularly NHS staff given the current situation, although this is obviously dependent on rental values.

Alan Pearce, Head of Planning, Development and Regeneration at LSH’s Bristol office, commented:

“As with most matters concerning Covid-19, the scale of this issue is evolving rapidly but it is potentially hugely significant for providers of PBSA and hoteliers in particular. Some universities will make the call about the start of the academic year in due course and this will have a major impact on when students take lodgings and subsequently what rental income the providers will receive. Some students will simply not come in 2020 even if universities are open for business as the effects of the pandemic continue to play out. This will be particularly evident across the foreign student market, with an estimated 485,000+ non-UK higher education enrolments[1] now in jeopardy. Remote learning will help in this respect however there is still likely to be a significant impact.

“Depending on the site location and characteristics, a change of use for a temporary period can alleviate the situation and, in our experience, most local planning authorities will be sympathetic to the situation and be keen to avoid empty buildings or worse. Our breadth and depth of experience across the student accommodation and BtR sectors means that we are well-placed to assist clients in reviewing their portfolios, preparing applications for temporary changes of use where appropriate and managing this process to help existing providers during what is an exceptionally difficult time.”

The reason behind the growth in the BtR sector is purely academic. The number of households in private rented accommodation is rising exponentially and is expected to account for at least 25% of the housing market by 2025 according to the Office for National Statistics. However, BtR occupiers (AKA customers as opposed to tenants) are more discerning in respect of the level of service, quality accommodation and value for money and, with the British Property Forum estimating approximately 100,000 purpose BtR dwellings across the UK (either delivered and under construction), there is a chronic under-supply.

Ian Scott, National Head of Build to Rent & PRS at LSH, commented:

“The emergence of BtR as an asset class has started to address the growth in demand from the private rented sector, but in reality, not enough purpose built rental product is being delivered, both in urban city centres and suburban towns and villages. 

“While an element of the rental market is attributed to affordability of housing and barriers to home ownership, there has been a behavioural shift towards renting over the past 10 years, particularly in the younger generation, where it is more of a lifestyle choice. Anything we can do to alleviate the chronic under-supply in the short-medium term, whether that be re-purposing existing stock temporarily or otherwise, is a step in the right direction.”