In the past, universities and cities have been incredibly successful in attracting local and international talent. However, attracting talent came under acute pressure in 2020, with the pandemic causing students to return home and new students being deterred by global measures, leaving them hesitant regarding the future.
The student housing market is one of the markets where the impact of the pandemic became visible immediately. After the initial impact in March, many landlords saw their properties fall vacant, a trend that quickly became visible on the HousingAnywhere platform. Short term providers switched to midterm rentals in the hopes of attracting a tenant. As a result, HousingAnywhere’s supply tripled or even quadrupled in most cities, with all cities showing substantial increases in available supply.
Landlords also adapted in other ways, such as by offering more flexibility in contracts and rental prices. As reflected in our International Rent Index, we witnessed a sharp drop in rental prices followed in Q2. In Q3, the sharp drop in rents began to level out, indicating that the shock effect of the pandemic on rental prices was behind us.
After an initial drop in demand, students returned to the platform, voicing that even a fear of the coronavirus wouldn’t stop them from following their ambition to move abroad. In many countries, the lockdown meant that local students had less competition when looking for a room, studio or apartment. Starting Q3, the gap left behind by American and Chinese students was filled by European students and young professionals who were relocating across the continent. Despite classes starting online, students were making the move, to be in the city when their university would open up. This did not surprise us, as students consider the social aspect as one of the major benefits of studying. As a result of the increased supply, students have been able to shop around for a good deal, making their main focus ‘value for money’ when looking for accommodation. Whether this is a bigger room with outside space or a higher-end apartment which they can share with friends: students want to stretch their budget as far as possible.
While increased supply from the holiday rental industry and lower competition from international students are good news for students currently looking for a place to live, the future of student accommodation continues to face complex challenges. The increase in enrolments and students returning to in-person classes starting in the second semester of this academic year will already cause difficulties for a range of university cities.
In the medium to longer term, we expect that companies and offices will open up again. This will spark wider competition for all sorts of accommodation. As a result, demand is expected to return to 2019 levels before the end of 2022. Cities or countries could resort to implementing rent controls as measures to keep rental prices down. While rent controls do offer some short-term relief to anyone who already has accommodation, they are not sustainable solutions. Instead, they are measures which keep us from solving the other side of the puzzle: creating enough supply to keep housing affordable. Cities urgently need a more quantitative and accurate approach to analysing the numbers that drive the demand for housing in their communities, while having the ability to break this down by accommodation type and length of stay. Space is scarce, but hardly anybody has insight into the real numbers behind this claim.
Newly built accommodation is urgently needed, but is costly and will take too long to accommodate the students that are in need of housing today. At the same time, permitting the transformation of existing buildings and apartments into student accommodation without any restriction can also bring negative externalities for communities, as we have seen with the rapid rise of holiday rentals in residential neighbourhoods. Solutions for these structural challenges are not easy to come by.
In order to properly procure the housing needs of (university) cities that thrive on international talent, it is important that we combine the various data sources and perspectives to provide validated insights into what kind of accommodation is needed. Not forgetting the needs of graduates and young professionals, as these groups are very much looking for similar accommodation and are therefore competing for the same space. Providing these insights ultimately means solving an important part of the accommodation issue.