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The domino effect of student tower blocks

The domino effect of student tower blocks

Market trends. You may wonder why, oh why it is a good idea to spend up to £800/month on a room in a cluster-flat in a student block. It would appear that students may not be the dim-witted sheep that the developers presumed.

Blog July

Market trends. You may wonder why, oh why it is a good idea to spend up to £800/month on a room in a cluster-flat in a student block. It would appear that students may not be the dim-witted sheep that the developers presumed.

See this item as reported in the Financial Times, these blocks are facing occupancy challenges. The quoted example has collapsed and it may only be a matter of time before our local offerings 'fess up to their failure to meet target occupancy. How will our City deal with that? These blocks are allowed, under permitted development, to produce under-size accommodation. They have missed the elephant in the room, that people do not want to live like this.

As the Portsmouth student blocks dominate the skyline, so they also now dominate the student rental market in Portsmouth. The initial impact was to significantly raise the ceiling price of shared accommodation in the City (they pay how much??!! We exclaimed). HMOs benefitted from being comparatively good value, new 'luxury HMO" small halls and larger HMOs started to appear across Southsea and life was good…..for about 5 minutes. The downside is that rents across the city are now higher than they would have been without 'student hall inflation'.

Development of these behemoths continues apace offering ever more 'experience-based communal facilities" such as cinema rooms, bars and gyms to tempt the naïve youngsters to part with their easy loan money. The brand new halls fill up for a year or two but will then be superseded by newer ones with more gadgetry and shiny branded furniture.

The HMO market in Southsea has taken a massive hit, with HMOs in the East of the City being sold (a question hanging over the cross-town bus service has diminished confidence) and landlords faced with reduced demand as well as Section 24  tax changes are on their way to greener pastures, yet this has not freed up housing for families as predicted - we have more serviced accommodation but little sign of the predicted price drop in either the rental or the purchase market that many foolishly predicted.

But why do I care when Serviced Accommodation is my thing? I care because (apart from being an HMO landlord as well) these blocks that are damaging the livelihood of landlords across the City are now moving into my territory. Despite having a planning condition limiting their occupancy to full time students, several of these places are taking nightly guests during the Summer months, indeed, some all year round. Apart from breaching their planning conditions, they are also in breach of their HMO licence (as they need one of those too) and should be paying Council Tax in exactly the same way as a small 3 or 4 bed HMO does - something the PDPLA have been arguing with the appropriate authorities for some time.

All holiday let businesses are seasonal. They scrape through the Winter on the promise of generous bookings in the Summer. The Portsmouth local plan anticipates an additional 500 hotel rooms required over the next 5 years. This year at least 1200 student rooms have been dumped on the Summer let market at low rates, rates only achievable with economies of scale not available to small operators. This has had a big impact not just on my business, but on the hundreds of local family businesses that host tourists in the City. Without the Summer boost there is little point putting in the additional effort to run short-term accommodation. We continue to out-wit these guys with clever marketing and more interesting places to stay but their impact is tangible and if it continues, many of the nice, bijou, comfortable or just plain quirky options which make a stay in the city so appealling will drop out of the market - and what will that leave? Rooms in these high rise rabbit hutches / battery student farms which will make a Premier Inn look luxorious - is that what we really want for Portsmouth?

My biggest concern is what happens next to our town centre? Over-supply of these rooms will inevitably beggar the solution of putting our most vulnerable residents in the under-sized accommodation. It stands partially empty when there is massive housing need. Think back to what happened when council housing was built in tower-block form, these quickly became dangerous places to live. This is happening elsewhere, such as in Harlow, where out-of-town office blocks have been converted to micro-flats which now house those in need. Located far from services like shops and schools, those on the lowest budget count these places among their options, isolating them into crime-ridden blocks. https://www.bbc.co.uk/news/uk-england-essex-47720887. The developers of these blocks need to stick to their rules as we all do, or the result will not be good for us, or for Portsmouth.

 

Written & oral information and advice from the Portsmouth & District Private Landlord's Association is given in good faith, but no responsibility whatsoever is accepted by the Association or it's officers for the accuracy of it's information & advice nor shall the Association be held responsible for the consequences of reliance upon such information.

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