As the shorter summer evenings signal the start of a new academic year, a chilling wind of anxiety will take hold for many university students. But it’s not necessarily school-related stress or nerves about leaving home that is causing them to worry. It’s something more fundamental: for an increasing number of students the question troubling them is “Where am I going to live?” Student housing – a residence room, a shared house, a small flat – was once a given. It is no longer, with the issue now an emblem of how our society is failing younger generations.
A global look at student housing conditions makes for bleak reading, as large financial investors increasingly buy up purpose-built student housing for their next big win. In the UK, average student housing prices now outstrip the maximum government-offered student loans. In Canadian cities like Toronto and Calgary, where student residences are full and rents are soaring, some have little choice but to sleep in their cars or in homeless shelters. Last year, dozens of Erasmus exchange students in Italy, unable to secure housing, were forced to sleep on the streets.
A 2022 survey from Scotland found that 12% of students had been homeless at some point since the beginning of their studies. In Turkey, students, many homeless, organised a protest movement called “We Can’t Shelter” to force the government to take action. The lack of affordable housing for students in California has universities scrambling to find other options, some resorting to the use of hotels as well as considering the possibility of using offshore barges.
Steve West, the former president of Universities UK, warned last month that a lack of affordable housing could force students to turn down their top university choices and stay closer to home. Those who do opt to live away from home may find themselves living in poor conditions and having to work more hours at jobs to afford the rent. It’s little surprise that research has found a strong correlation between academic achievement and a student’s housing situation.
The stakes are high. A university education can lay the groundwork for future success. Conversely, massive student loans to pay for tuition and living expenses while studying can burden students for the rest of their lives. The ideal is for universities to be places where students learn how to harness their talent and energy for the common good. Meanwhile, investors view universities as an opportunity to line their pockets with the effect of immiserating students.
Purpose-built student accommodation (PBSA), as it is called in the finance world, has become one of the hottest asset classes in real estate, with forecasters predicting “enormous returns” on investment – all at the expense of students and their paying parents. Some of the largest investment firms and pension and sovereign wealth funds have sensed an opportunity and are invading the space.
In 2022, Europe saw a 130% increase in investment in PBSA from the year prior. The UK, home to one of the most mature corporate-driven student housing sectors, also saw a record investment of £7.2bn – a 69% rise on the previous year.
Blackstone, the world’s largest alternative asset management firm, has been active too. It paid nearly $13bn to acquire American Campus Communities in 2022, purchasing what amounts to almost 112,000 beds, and becoming the largest owner of student accommodation in the US overnight. The logic behind the purchase? “Student housing offers some of the best risk-adjusted returns in any sector of real estate,” according to the commercial real estate company Berkadia.
The results of this investor activity can include rapidly escalating rental prices, the creation of luxury units with amenities that students say they don’t need and increasing pressure on the cost of other student housing in the private rental market. In many cases student debt load is as much about housing costs as it is about tuition.
The crisis of unaffordable housing for university students sits firmly within the broader housing crisis, with the cost of housing relative to income rising in cities across the globe. And just as with this broader crisis, there is no single policy that will fix student housing. The one thing that is clear is that student housing, like all housing, must be understood and treated by governments and universities as a human right, not an asset class designed to enrich the wealthy.
What choice do we have? The status quo is effectively a war on young people that inhibits their ability to dream, develop and reach their full potential. Governments and universities would be wise to understand the steps they must take to curb investor practices in residential real estate – the future depends on it.
Leilani Farha is global director of The Shift housing initiative and the former UN special rapporteur on the right to housing. She is the co-host of the podcast Pushback Talks