London is facing an escalating crisis in purpose-built student accommodation (PBSA), with a severe shortage that is forcing thousands of students into the already strained private rental market. This situation is intensifying the city's housing affordability challenges and threatening to displace local residents. The shortage is stark: London currently houses around 400,000 students, yet has just over 100,000 PBSA bedrooms available, leaving a deficit of roughly 300,000 beds. The problem is expected to worsen with projections that one million students will move to London in the next five years, according to industry voices.

A significant bottleneck contributing to this crisis is the delay caused by the new Building Safety Regulator (BSR) established in 2022 to oversee high-rise developments typically over seven storeys or 18 metres tall. These safety regulations, while essential for protecting lives, have lengthened project timelines by more than 12 months on average. Developers must clear stringent safety checkpoints known as BSR gateways to proceed, and missing a gateway can delay projects by months. Building industry insiders highlight that these regulatory hold-ups are blocking thousands of student beds from coming online as planned. For example, Unite Students – a major player in PBSA – reports an average six-month delay across their projects due to BSR approvals, with some units still awaiting clearance.

The impact on London's rental market is considerable. With fewer affordable student housing options, many students turn to the private rental sector, increasing demand and pushing rents upward. This trend compounds existing shortages of affordable homes in London, where boroughs such as Wandsworth are resorting to placing homeless families in hotels due to lack of accommodation. The anticipated Renters Rights Bill further complicates the situation, as it may lead to a third of private landlords exiting the market, exacerbating supply issues. The addition of thousands of students competing for private rentals threatens to price out local families. Industry analysis warns that just six undelivered high-rise student blocks could have housed around 3,000 students, all of whom will now seek private rentals if the blocks are not ready for the academic year.

The government’s recent creation of a dedicated BSR team within the housing department, with an accelerated triage process and additional staff, signals recognition of the problem. However, stakeholders express scepticism that this alone will produce rapid change without clearer prioritisation of PBSA projects. Calls persist for targeted action plans to unblock delayed developments and integrate student housing more fully into broader housing strategies.

Underlying the regulatory delays are other structural issues impeding affordable PBSA delivery. The 2021 London Plan aimed to stimulate student housing but has fallen short, with just 3,100 affordable PBSA beds securing planning consent since its launch — fewer than 1% of London’s full-time students. Research by CBRE and QX Global shows that only about 5,800 affordable beds are currently in the pipeline for delivery, below targets, and many developments permitted under the Plan remain non-operational. Factors such as development viability, the complexity of planning systems, and the dominance of a small group of developers further stifle affordable PBSA growth. The shortage of student housing has pushed many to rely on Houses of Multiple Occupation (HMOs), whose stock in London has declined by 23% in five years, adding to accommodation strain.

Despite these difficulties, investors continue to view the UK PBSA market as attractive. According to a 2024 Knight Frank report, record deals valued at £473 million reflect ongoing appetite for PBSA assets, driven by high rental yields, particularly in cities like Manchester and London. Major operators such as Unite Students are expanding, securing capital to develop more beds and acquiring properties from universities. Partnerships between universities and private developers are also growing, exemplified by Newcastle University's £250 million deal with Unite Students to add 750 beds. However, rising construction costs—exceeding £100,000 per room in some cases—and high rental prices mean that affordability remains a concern. Student rents in London average £13,595 for the 2024-25 academic year, surpassing maximum maintenance loans, making it increasingly difficult for lower-income students to afford accommodation.

This confluence of regulatory delays, planning shortcomings, rising costs, and high demand paints a complex picture. While the PBSA sector is poised to provide safer and better-quality student housing, it urgently requires stronger government and regulatory support to accelerate project approvals and embed student housing within London's broader housing policy. Without such coordinated efforts, the crisis is likely to deepen, pushing more students into unaffordable or unsuitable housing options, and further destabilising London’s fragile rental market.