Housing supply in many UK cities is being restricted by the conversion of family housing to student lets and local tenants are being prices out, according to new research. International real estate adviser Savills estimates that 66,000 properties or Houses of Multiple Occupation (HMO) now occupied by students could be freed up for conventional family housing through the delivery of more purpose built student accommodation.
In its latest analysis report it calls on councils to recognise the importance of promoting such schemes through planning and points out that in recent appeal cases, London boroughs have recognised the need to free up family housing by moving students into purpose built accommodation which offers a well managed, controlled environment. Savills says that two thirds of this unlockable family housing stock is in the top 25 towns and cities across England and Wales, where student demand and housing shortages are concentrated.
Freeing up 66,000 homes would create demand for up to 260,000 student beds, opening up opportunities for developers and investors in the lucrative student accommodation market. There are an estimated 132,000 full time student households across England and Wales, many concentrated in high density student areas. Student lets in HMOs have become an increasingly attractive target for private investors, because students are prepared to over occupy properties, boosting rental returns.
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The result is a double whammy for local non student tenants and aspiring home owners. Not only do students price other tenants out of many family housing areas in major UK towns and cities, credit conditions post downturn have favoured landlord investors rather than less equity rich potential owner occupier buyers. ‘Local council coffers would also gain. We calculate that reinstating these student HMOs to homes for non student residents would boost council tax returns by around £1.5 million per town or city, since student only houses are council tax exempt,’ said Savills research analyst, Neal Hudson.
‘Also, there is the potential for councils to receive six years’ worth of payments through the New Homes Bonus on the newly constructed student housing,’ he added.
Without greater provision of purpose built accommodation, and in the face of an under supply of new housing stock, the situation could deteriorate, the report suggests. Article 4 of the Town and Country Planning Act proposes restricting new HMO supply which could push students and associated landlord demand into smaller properties, pricing out other occupier and tenant groups.
‘The conversion of family housing into student lets has been a significant, but largely ignored feature of the housing boom. Our analysis shows the important contribution that purpose built student accommodation makes. Planning applications should not be considered in isolation, but rather as an intrinsic part of the whole housing market dynamic,’ explained Hudson. ‘For the institutional investor in student housing the UK market offers a mature, counter cyclical investment opportunity. For councils, the promotion of purpose built student developments can represent significant social and fiscal gains,’ he added.