London Plan 2021: PBSA Real Estate Gap Leaves Students Struggling

Key Points

1. The London Plan 2021 aimed to make student accommodation more affordable but has only delivered about 1% of the required beds, with just 3,100 secured since its introduction.

2. Demand for purpose-built student accommodation (PBSA) in London has outpaced supply, with a current gap of 100,000 - 100,500 full-time students.

3. Despite the London Plan's target of 3,500 new beds annually, only around 2,870 beds per year are currently in the pipeline, falling short of the yearly target.

4. The shortage has led students to seek alternatives such as Housing of Multiple Occupation (HMOs), but even this stock has shrunk by 23% in the last five years.

5. The PBSA market in London is dominated by a few large developers. Over 45% of beds are applied for by just five developers, restricting the entry of new players and exacerbating affordability issues.

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The London Plan 2021 was introduced by the Mayor of London and, so far, has failed to stimulate the expected growth in the PBSA real estate or purpose built student accommodation sector in the England capital. The plan set out to make London student accommodation more affordable. However, it has just yielded about 3,100 student beds securing consent since the plan was introduced in 2021. To put matters into perspective, these 3,100 beds make up for just about 1% of London’s student population which stands at over 400,000.

According to a paper released by CBRE and QX Capital, the current gap in the PBSA real estate market demand and supply is a pressing issue, standing at 100,000 - 100,500 full-time students. The current supply of London student accommodations is rapidly being outpaced by the growing demand, highlighting the urgent need for more student beds.

The frameworks of the London Plan 2021 have significantly impacted the construction of student beds. If the construction of student beds had aligned with the London plan, the city would have seen about 7,600 student beds in the pipeline. However, the PBSA real estate market has seen even less than that, with around 5,800 affordable beds, underscoring the plan's influence on the sector.

The London Plan 2021 approximated a need for 88,000 additional beds in the PBSA real estate sector between 2016 - 2041. When annualised over 25 years, the number of target beds stands at 3,500. However, the current number of beds in the pipeline forecasts about 2,870 beds per year, falling way below the yearly target. 

One thing to note is that all the beds constructed under the planning permission of London Plan are yet operational. This chronic shortage of purpose built student accommodations has led students to look for alternatives such as Housing of Multiple Occasion (HMOs). The students have seen tough times in that sector too as the HMO stock has has shrunk by 23% in the last five years.

Affordability is a core goal under Policy H15 under the London Plan 2021 and it aims to construct as many affordable student housing options as possible. The rents for these rooms are not to exceed 55% of the maximum London maintenance loan, which equates to about £188/week for the 23/24 academic year.

Kirsten Dyer, Director of Living Valuation and Advisory at CBRE, said: “The numbers are compelling and it is clear delivery of both affordable and market rent PBSA is far below the levels required to support London’s domestic and international student body. The target of 3,500 rooms per annum is not being met, not enough universities are engaged in the issue, and a restricted group of developers dominate the market because of the challenges the London Plan now presents.”

Post the implementation of the London Plan 2021 for the PBSA real estate market, the development of PBSAs seems to be restricted to only specialist developers with over 45% of beds applied for by just five developers. This monopoly in the PBSA market demonstrates the barricades facing the inclusion of wider entrants and players in the industry.

David Tymms, Strategic Advisor at QX Global Group, said, Adopted with the best of intentions, the London Plan has failed in its mission to deliver meaningful growth in new market rent and affordable student beds in the capital. The complexities of the planning process, alongside viability challenges, have driven many developers out of the market, and only the largest universities appear to be equipped to engage,” Tymms added that the prospects for lower-income earning students seem to be bleak in the upcoming future looking at the state of PBSA London. However, they are still a great housing option. Learn more by checking out why PBSAs are the right choice for students.

TL;DR

The London Plan 2021 aimed to make student accommodation more affordable but has only delivered 1% of the needed beds. Demand for student housing in London exceeds supply by 100,000 students, with only 2,870 beds per year in the pipeline against a target of 3,500. The market is dominated by a few developers, exacerbating affordability issues and forcing students to seek alternatives like HMOs, which have also decreased by 23% in the last five years.

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