London Leads in Affordable PBSA: What's Next for the Rest of England?
In Short
The Situation: London boroughs are implementing the London Plan's requirements for affordable Purpose-Built Student Accommodation ("PBSA") in varied ways, with some setting stricter or additional criteria.
Where: Outside London, other UK cities, such as Bristol, Nottingham and Norwich, are adopting or considering similar strategies to increase affordable student housing, though requirements differ.
The Challenges: Key challenges include balancing affordable student and general housing needs, navigating diverse local regulations, and ensuring financial viability of PBSA schemes.
The London Plan requires London boroughs to address the strategic need for PBSA, including affordable student accommodation. Affordable student accommodation is defined as "a PBSA bedroom that is provided at a rental cost for the academic year equal to or below 55% of the maximum income that a new full-time student studying in London and living away from home could receive from the Government's maintenance loan for living costs for that academic year".
The London Plan introduced (amongst other things):
- A threshold for PBSA schemes to use the Fast Track Route, requiring at least 35% (and sometimes 50%) of student bedrooms to be affordable student accommodation; and
- A requirement for most bedrooms, including all affordable student accommodation bedrooms, to be secured through a nominations agreement for occupation by students of one or more higher education providers.
How Is This Being Implemented in London Boroughs?
London boroughs have adopted varied approaches to the implementation of the London Plan with some setting additional requirements and others being more flexible in its application. Notably:
- Hackney requires PBSA schemes to allocate at least 50% of student rooms as affordable. So whilst the London Plan allows for proposals providing 35% on-site affordable to follow the Fast Track Route, anything below 50% would require a viability assessment;
- Lambeth follows the London Plan but introduces numerous additional requirements that must be addressed, such as evidence that the student accommodation would not lead to an over-concentration within the surrounding area and providing for mixed uses in a scheme; and
- Southwark allows for two different routes: a 100% nominations scheme with the maximum amount of affordable student rooms with a minimum of 35%, subject to viability; or when providing direct lets at market rent, a scheme must provide the maximum amount of 35% of conventional affordable housing by habitable room, subject to viability.
Emerging Trends Outside of London
The influence of the London Plan is evident as other cities across the country begin to adopt similar strategies to address the need for affordable student housing:
- Bristol: In its local plan, Bristol City Council appear to be following the London example by mandating that at least 35% of bed spaces with student developments are affordable. For Bristol, affordable student housing is defined as "a bed space within the development that is provided at a rental cost for the academic year equal to or below 50% of the maximum income that a new full-time student living away from home could receive from the Government's maintenance loan for living costs for that academic year". The council will regularly review this percentage to ensure it remains viable.
- Nottingham: Nottingham City Council requires an affordable housing contribution from PBSA schemes to contribute to the city's general affordable housing needs, rather than providing specific affordable student accommodation.
- Norwich: Norwich City Council is considering a similar approach to Nottingham, as outlined in their latest report.
Future Prospects and Challenges
The future of affordable student accommodation in England will likely see a continued evolution of policies and strategies tailored to address local needs. Key considerations throughout this period include:
- Balancing Competing Housing Needs: City councils will need to strike a balance between providing affordable student accommodation and addressing the broader affordable housing needs. This may involve creative solutions that integrate student housing within mixed-used developments, as seen in Lambeth.
- Varying Regulatory Environments: With no one-size-fits-all approach adopted across the country, developers and investors having to navigate a complex regulatory environment with varying local requirements. This will necessitate a thorough understanding of local policies and considered planning before site selection, particularly in areas with more stringent requirements.
Viability Assessments: Ensuring PBSA projects meet the affordability criteria while remaining financially viable is likely to be a key challenge and it will be interesting to see if sites in areas that take a more flexible approach to affordable student housing requirements become favoured, particularly across the London boroughs. Securing nomination agreements with universities may reduce any vacancy risks by providing a steady stream of tenants.
Four Key Takeaways
- The London Plan introduced a threshold for PBSA schemes to provide at least 35% affordable student housing to take advantage of the Fast Track Route for planning applications, and for all affordable student accommodation to be secured through a nominations agreement for occupation by students of one or more higher education providers.
- London boroughs have taken differing approaches to the London Plan, some boroughs introducing additional requirements for affordable housing space, others, such as Southwark, have allowed for direct-let schemes.
- Cities outside of London are beginning to adopt affordable student accommodation policies with some adopting similar requirements to the London Plan, and others considering contributions to general affordable housing needs that specify affordable student accommodation.
- Amongst the wider backdrop of councils putting greater focus on addressing affordable housing needs, it will be interesting to see whether councils outside of London follow the London Plan or develop their own policies. The development of this is something that all stakeholders to PBSA transactions should follow.
