Now the new academic year has started and students are either returning to or starting their courses in the UK I thought it might be a good idea to take closer look at the student rental market focusing on Edinburgh.
Expansion of Higher Education across the UK
The expansion of Higher Education (HE) in the UK has outpaced the availability of suitable, quality, and affordable accommodation for students (Unipol, 2021; Wilking et al., 2022). The result is university towns and cities have limited capacity to ensure housing welfare for students which becoming an increasing concern for people who want to access HE across the country. Higher education (HE) and further education (FE) provider enrolments increased to 3,070,875 in 2022/23. In 2018/19 the number was 2,631,330. (Source Higher Education Statistics Agency HESA)
Higher education (HE) student entrant enrolments by level of study Academic years 2013/14 to 2022/23
Different Types of Student Housing
There are different types of student house but broadly these are:
- Students living with parents or already in their own established home commutable to their Higher Education Institution (HEI)
- Students living in university halls
- Students living in purpose-built student accommodation (PBSA), sometimes in nominated spaces agreed with their HEI
- Student co-operative housing
The remainder, which is often the largest cohort, are those housed within the private rented sector (PRS), normally in houses of multiple occupation (HMOs).
Studentification
The widening of access and the creation of the ‘new’ universities in the 1990s has transformed the housing market for HE students in the UK by creating a huge demand for term-time housing in certain locations across the country. The transformational effect on university towns and cities, from the inflow of students tending to cluster in established neighbourhoods is described as a process of studentification and often has very negative connotations for the local population.
Scottish Universities reliance on students from overseas
According to the Institute for Fiscal Studies (IFS) Scottish universities are increasingly reliant on international student fees to help cover increasing teaching costs of home students. In the 2022–2023 academic year, international students made up nearly 29% of the total student body. Funding per student per year of study has fallen 19% in real terms since 2013-14. International students make up an average of 22% of the total income for Scottish universities, but some institutions rely on them for almost half of their income.
The number of places available for Scottish home students is regulated directly by the Scottish Government. While students from other parts of the UK pay tuition fees to study in Scotland, international students face significantly higher fees, with no cap on their numbers. As a result, fees from international students effectively subsidize the cost of educating home students.
Focus on Edinburgh
Edinburgh has had a longstanding housing shortage across all tenures, this also significantly impacts students. Increased participation in in Higher Education (HE) both domestically but also due the ongoing recruitment of high numbers of international students has accentuated the supply demand imbalance. With four major universities—the University of Edinburgh, Heriot-Watt University, Edinburgh Napier University, and Queen Margaret University—the demand for student housing consistently outstrips supply and demand continues to grow.
In the Student Housing Options and Experiences of homelessness in Scotland report by the Cross-Party Group on Housing it states that of the full-time cohort studying in the city, there were 11,125 students who could be described as commuters in 2022. This would leave 52,515 students who would be looking for rented accommodation. In the same year, there were estimated to be 21,158 bedspaces available to students, comprising 9,426 privately provided bedspaces and 11,732 bedspaces in university maintained halls. These figures suggest a shortfall of 13,852 PBSA bedspaces in Edinburgh in 2022/23 (again, assuming a STB ratio of 1.5).
Even with the number of purpose-built student accommodation (PBSA) blocks being built there simply aren’t enough beds to accommodate the influx of students. In Edinburgh there also seems to be a higher volume of students living in the PRS when compared to other cities. This imbalance leads to fierce competition for available properties, making the search for a home often a difficult and emotionally challenging experience.
Short-Term Lets and AirBnB Impact
Another factor adding pressure to the student housing market on many areas is the growing popularity of short-term lets, particularly through platforms like Airbnb. This is especially evident in Edinburgh. Landlords often prefer to lease their properties for short stays as it can be more lucrative, especially during the city’s world-famous festivals such as the Edinburgh Fringe and Hogmanay. This has reduced the availability of long-term rentals, pushing students into an even more competitive market and often making it harder to find accommodation that is both affordable and long-term.
Rising Rents
The demand supply imbalance has inevitably driven up rental prices in the capital. According to various market reports, Edinburgh has some of the highest rent levels in Scotland, and even across the UK. Students often face paying premium prices, not only in central areas such as New Town, Marchmont or The Old Town but even in traditionally more affordable neighbourhoods. The sharp rise in rental prices has made it difficult for many students to find affordable accommodation, with some even being forced to move further away from the city centre, increasing their commuting time and expenses.
The Challenges Students Face in Finding Accommodation in Edinburgh
For students, moving to a new city is both exciting and daunting. Scotland’s Capital, with its rich academic heritage, iconic landmarks, and vibrant social scene, is a prime destination for students from around the world. However, the city’s charm comes with its own set of challenges—chief among them is finding suitable accommodation.
As a letting agency we have seen firsthand how difficult it is for students to secure a place to live in Edinburgh, especially in recent years. The struggle to find suitable accommodation can take a toll on students’ mental health. Many report feeling anxious and stressed by the uncertainty of their housing situation. Some students even defer their studies or reconsider attending university in Edinburgh altogether due to the difficulty of securing housing.
Timing and Application Process
For students, especially international students, navigating the timing of house hunting in Edinburgh can be incredibly stressful. Properties are often listed and rented out quickly, and it’s not uncommon for desirable student flats to be snapped up within hours of being advertised. Many students begin searching months in advance, but even then, they face difficulties. Moreover, students who don’t arrive early face a much narrower pool of options.
The application process itself can also be difficult to navigate. Landlords or letting agents will require references and guarantors. For students, particularly those coming from overseas, this can be a challenge. Some may not have local references or UK-based guarantors, which may limit their options even further.
Investment Opportunities
There is an obvious gap in the market in terms of investment. Most inward investment aimed specifically at student accommodation is led by institutional investors and is focused on luxury high cost renting and high income PBSA blocks, which tend to attract international students. The result is the PBSA system seems to be unable to deliver more affordable mid-range properties.
In addition, there is strong anecdotal evidence that the traditional HMO sector is shrinking resulting in a growing structural imbalance. Hence there is a clear need for students to be provided with a greater range of housing options, some with more affordable tenures, which not currently being provided by the market. This offers real opportunity for any investors willing to enter the student HMO sector as currently demand far outstrips supply.
There are certain additional costs associated with this type of investments and risk needs to be mitigated, but this can be achieved by professional management.
For the well advised investor the returns from HMO properties often outperform those from the more traditional “professional” let market.
At Glenham we specialise in HMO properties and can help you with the all the legal implications of owning this type of property, ensuring you have all the right licenses and permits from the council. We will also screen all tenants, seek guarantors and provide full rent guarantees to further mitigate a landlord’s risk. To find out more about our offering, why not give us a call!
