The UK student housing sector is undergoing a period of meaningful transition. Rising interest rates, affordability pressures, demographic shifts and regulatory change are reshaping how investors, developers and universities think about purpose-built student accommodation (PBSA).
In this in-depth Q&A, Martin Hadland, Founder & Managing Director, of Student First Group shares his perspective on where the real opportunities lie, how demand is evolving, and what the next five years could look like for the sector. Drawing on market data, research insights and hands-on experience, Martin offers a balanced view that recognises both the headwinds and the longer-term fundamentals that continue to underpin student housing.
Where are the real opportunities by location and product type, and what are the biggest structural shifts expected over the next five years?
The last 12 months have been defined by uncertainty and headwinds. We’ve had persistently high interest rates and construction costs in the UK, inflationary pressures that haven’t fully eased, and a wider global backdrop that has made investment stability difficult. All of that has fed directly into decision-making across the student housing sector.
Alongside these macroeconomic factors, we’ve also seen student number issues emerging in certain locations, such as Nottingham and Leeds. In some cities, universities have not recruited the international cohorts they were expecting, which has had a knock-on effect on occupancy levels. What’s been particularly notable is that this has occurred in markets where historically you would not expect to see demand softness.
One of the structural shifts we’re seeing is a much more cautious and targeted approach to development. The days of “build it and they will come” are largely behind us. Instead, decision-making is becoming more forensic, with investors and developers paying closer attention to where demand truly exists and what students can realistically afford. Few markets enable rents that mean development is viable.
From a product perspective, the opportunity increasingly sits in mid-market and repositioned assets, rather than new-build schemes at the very top end of the rental spectrum. Cost pressures mean that delivering new PBSA at rents that stack up for both students and investors is challenging in many locations. As a result, attention is shifting towards existing stock that can be upgraded, reconfigured or managed more efficiently to deliver better value. Over the next five years, this shift towards smarter asset management, refurbishment and differentiation is likely to become more pronounced, particularly as supply and demand in several core markets move closer to parity.
How are regulatory and legislative changes influencing the market?
Regulation is becoming a bigger part of the conversation. PBSA that is linked to universities where they issue the residential agreement is typically covered by licences rather than tenancies, but broader legislative changes still shape how people think about risk and opportunity.
The Renters Rights Act is due be in force by the time of the conference, and even though PBSA blocks are not directly affected, it’s influencing sentiment across the wider residential and student housing markets, and could impact the student accommodation provision in the HMO sector. The interaction between University nominations and the RRA needs careful analysis to assess whether tenancies created are Assured Periodic Tenancies or not. There will also be a transition period as the impact of the new legislation settles.
Affordability is also increasingly becoming a planning consideration. We’ve already seen this in London, where the London Plan has required a proportion of student accommodation to be delivered at affordable rent levels in order to fast-track applications. Planning authorities elsewhere are beginning to explore similar approaches, even if they’re not yet fully embedded in policy.
York is one example where policy has gone further, with applications needing support from one of the city’s universities. While the intent is understandable, the implementation has raised questions about what that support actually means in practice. These kinds of policy interventions will need refinement if they’re to genuinely support delivery rather than create unintended barriers.
Finally on policy, the emerging EPC-C requirement for private rented properties could be a material capex consideration for some properties, affecting both HMO competitiveness and PBSA asset valuations, and is already influencing investment decisions.
What are the key growth themes emerging in the student housing sector?
One of the more interesting growth themes is the changing profile of international students. Overall international enrolments in 2024-25 fell 6.1% on the previous year — a real headwind for university finances — but there are important shifts within that mix worth watching.
Take the US. Total enrolled American students stood at around 23,500 in 2024-25 according to HESA — a relatively modest increase on the prior year. The more compelling story is at the application level: UCAS data for the 2025 entry cycle showed US undergraduate applications up nearly 12%, though that growth rate has already moderated to around 3.5% at the 2026 entry January deadline. Whether the political environment in the US drives a sustained “Trump surge” towards UK universities remains genuinely uncertain — and at least one vice-chancellor has publicly cautioned against over-relying on it. In absolute terms, US undergraduates remain a small cohort of under 7,000 acceptances, though a disproportionately high-value one.
The bigger international story is China. China remains the top sending country by a large margin, with undergraduate applicants up over 10% for 2026 entry — a meaningful positive for many institutions after years of volatility. That rebound, combined with continued growth in Indian applicants, suggests the international picture is stabilising in some markets even as it contracts in others.
We’re also seeing students increasingly living in build-to-rent (BTR) schemes, particularly in cities like Manchester, as well as in co-living environments. The boundaries between PBSA, BTR and co-living are becoming more blurred, although one of the challenges is that reliable data in this area is still limited.
Firms like CBRE, which do a lot of BTR valuation work, have some insight into the number of students living in different types of accommodation, but beyond that the data set is relatively thin. That makes due diligence and market understanding even more important.
Another key theme is the financial distress facing many universities. Some institutions are looking to “grow their way out of trouble” by competing more aggressively for students. However, they’re often competing for the same pool, which isn’t projected to grow dramatically.
One way universities are trying to differentiate themselves is through accommodation guarantees, which can be a powerful recruitment tool. This, in turn, creates opportunities for partnerships between universities and accommodation providers over the coming years.
Finally, we are noticing increases in the volume of commuter students. There has always been a percentage of students that prefer to live at home for financial or other reasons, but there seems to be an increasing number that perceive the value of a degree to be worth the tuition fee, but not the accommodation cost in addition.
Where is the UK student housing market headed?
This is probably the hardest question to answer definitively. You can look at the market through either an optimistic or pessimistic lens, and both are valid to an extent.
On the positive side, demand for student accommodation is still growing, albeit slowly. Supply growth is being throttled by viability challenges, planning constraints, higher borrowing costs and more stringent funder due diligence. That balance creates opportunities, particularly in well-located markets with strong universities and proven demand.
There is also a strong market emerging for second-generation and even third-generation assets that need repositioning or investment. Some owners may be unwilling to commit the capital required for refurbishment or defensive spend, creating opportunities for specialist buyers who are prepared to do so. This is likely to lead to a more clearly defined two-tier market.
At the same time, high interest rates are suppressing transaction volumes. If investors can achieve close to 4% on relatively low-risk savings, the additional return required to justify development risk becomes harder to justify. That inevitably affects appetite and pricing.
Despite this, student housing still compares favourably with many other asset classes. Annual rent uplifts – even when they’re below CPI – provide a level of income visibility that is attractive, particularly when combined with relatively stable long-term demand.
Looking ahead, affordability is likely to remain a central issue, both politically and socially. With a Labour government, themes such as social mobility and access to education are likely to shape future policy. Planning authorities are already beginning to reflect this in how they assess student housing schemes.
Student finance will also play a role. Concerns around earlier loan types, where borrowers are repaying but balances continue to rise due to high interest rates, could influence future participation and behaviour. Where student loans “settle” over time will matter.
Universities are struggling more than ever financially, and we are seeing capital investment into academic projects with the Office for Students indicating that nearly three quarters of universities could be return an operational deficit in the current year. We are about to release research on the current financial requirement to improve the condition of university owned accommodation and in my view it is inescapably clear that we will see more and more university/private partnerships, be that nominations, joint ventures or DBFO style transactions.
Finally, broader housing pressures cannot be ignored. The UK is still projecting significant population growth, while new housing delivery continues to lag behind demand. That wider housing stress is likely to push more students towards PBSA and away from HMOs, particularly as legislative changes make life harder for small private landlords.
Most commentators were expecting lending rates to ease and stabilise around 3% over the next two years, which would help support renewed activity. However, geopolitical risks remain a wildcard that could quickly change that outlook, and the impact of the war in Iran undoubtedly pushes the likely trend down to those levels further into the future.
Final thoughts
The UK student housing market is not without its challenges, but it is far from broken. The sector is maturing, becoming more data-driven and more focused on value, affordability and long-term fundamentals. For those willing to look beyond headline risks and understand the nuances of location, product and demand, opportunities remain very much on the table. And I see partnerships being the primary delivery vehicle for university connected projects.