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While the current economic climate has slowed investment activity across the UK, the purpose-built student accommodation (PBSA) sector has remained resilient, with Knight Frank reporting on £600m worth of deals in 2025 across its team alone.
Anna Armstrong is an associate at Howard Kennedy
Danielle Coglin is an associate at Howard Kennedy
This resilience is directly linked to the acute student housing shortage, rising rents and intensifying competition for available rooms. Universities across England and Wales are now reconsidering how to secure sufficient accommodation for their growing student populations.
This shortage has led to strengthened co-operation between universities and PBSA developers and operators as parties look to structure commercially sustainable arrangements that balance financial viability with the operational demands of housing students, as well as strict planning requirements depending on location.
There are three principal contract types between PBSA providers and universities: nominations agreements, leases to universities and direct let agreements.
Under direct lets, providers let rooms directly to students and manage the block themselves. This mirrors traditional private rented sector arrangements and gives building owners greater control over operational decisions. However, the provider assumes responsibility for marketing, lettings and pastoral care. With direct lets, there is increased exposure to occupancy risk, which is particularly relevant where demand fluctuates between regions.
Leases to universities are an investor’s dream as they provide guaranteed yields for a fixed term. However, these leases are financially burdensome for universities as they cannot renegotiate rents or service charges. As such, if there is a downturn in students, the risk remains with the university to cover the rent and service charge.
Nominations agreements, by contrast, are contracts under which universities commit to nominate a minimum number of students for a fixed period. In return, universities can be confident they are able to offer accommodation to their students in spite of the housing crisis while retaining influence over rent levels and certain operational matters.
Nominations agreements allow universities to expand student numbers while maintaining influence over welfare and affordability considerations. The agreements often include data-sharing provisions and welfare notification clauses, enabling universities to respond to wellbeing concerns even when accommodation is privately operated. This supports universities’ pastoral obligations and reflects the increasing regulatory emphasis on student welfare in England and Wales.
In London, it is now a strict planning requirement for PBSA developers to enter into student housing nominations agreements for most of the units including the affordable units prior to occupation. Furthermore, councils outside London in England and Wales are also beginning to see the benefits in prioritising the long-term partnership between providers and universities, often favouring developments secured through nominations agreements.
Key attractions
Although nominations agreements often yield slightly lower rental returns for PBSA developers, they remain attractive for three key reasons: they provide a guaranteed student tenant base, supporting long-term financial viability; they reduce or eliminate marketing costs – a benefit also recognised by lenders seeking revenue certainty; and they are viewed favourably by investors because a portion of occupancy risk transfers to the university.
Risks do remain for universities as students may vacate early, leaving them responsible for unfilled rooms.
The duration of nominations agreements varies nationwide, but where short-term arrangements are permitted outside London, they can be useful for a university where the future is unclear and the university doesn’t want an unduly onerous long-term commitment.
However, the negative is that this can also create uncertainty for universities, which may need to renegotiate or tender for rooms annually. Traditionally, ‘soft’ nominations agreements allow flexibility in room numbers; but, depending on the location, some nominations agreements are driving a shift towards mandatory minimum commitments, increasing universities’ financial exposure if rooms go unfilled.
The student housing crisis remains a significant issue in England and Wales, but the PBSA market continues to adapt. Effective contractual structuring will be central to sustaining investment, meeting planning expectations and supporting universities’ urgent need for safe, affordable student accommodation.
Anna Armstrong and Danielle Coglin are associates at Howard Kennedy