From student-only to “change of use”
As the pandemic has curbed international tourism and imposed social distancing measures, universities have started to embrace remote learning strategies for the 2020/2021 year.
This certainly does not bode well for occupancy levels in purpose-built student housing. As a matter of fact, many PBSA providers have been forced to release students from their contracts several months ahead of the end of the academic year, which has sent vacancy rates soaring and rents plummeting.
Undoubtedly, a “new normal” is coming and although it is still largely unknown how COVID-19 will affect student numbers, reports paint a challenging picture. A London Economics study study shows that there is an expected 16% decline in domestic and 47% in international first-year applications leading to a £2.5bn hole in university budgets.
What is more, travel restrictions may lead to fewer international students coming to the UK. As we wrote before, research by the British Council (2020) demonstrates that 13% of Chinese students, the largest group of international students in the UK, are unlikely to return to school and 28% remain undecided about coming back.
If such projections come true, PBSA operators need to seek alternative solutions to counteract the fall in student numbers because of the pandemic. A temporary change of use into space aimed at young professionals and key workers might be a good strategy to adopt.
This is an uncertain time for anyone in the student accommodation sector. But challenges create opportunities.
For some, the moment is right for councils to try lift restrictions on PBSA assets and let them explore alternative options to tackle low occupancy such as:
- A temporary change of use
- Change/ removal of planning condition
This could be an insurance policy against void periods and a chance for PBSA operators to take control of the situation created by COVID-19. The idea is purpose-built student accommodation operators to apply for a change of use of their assets and expand their student-only market to young professionals and essential workers.
Naturally, it won’t be easy; many PBSA planning permissions have restrictive conditions and are bound legally by 106 agreements. Moreover, the planning system does not encourage temporary changes of use, But two-year permission to change the status of PBSA buildings allowing the hosting of short-term lettings could maximize the use of empty units.
Additionally, under section 73, it is possible to change/remove the planning conditions of a building. But it needs to be considered that such a change is permanent and needs to be well thought out, defined, and aligned with local authorities.
This has sounded like an unlikely idea before, but in such unusual times councils are taking note because vacancies benefit no one.
The outcome of such a scenario depends on the specifics of the planning permissions in place. For example, through the years there has been confusion on how to classify student accommodation. Repurposing existing accommodation for young professionals could help operators combat the decline in demand and income.