Amid London’s affordability crisis, student accommodation rents are rising dramatically, but incentives are growing even faster.
There has been fierce competition in the UK student housing market, with rental growth of 7.5% per year since 2021, and corporations offering financial incentives increasing by 15%. Despite historic investment and development, London is facing a severe affordability crisis, with rents exceeding the amount students can borrow through maintenance loans.
Rent rises, and financial incentives are complicating the picture in the UK’s purpose-built student accommodation (PBSA) market, which is already struggling with affordability, particularly in London, according to a new study. Our 2025 Insight Partner, StudentCrowd, has published a report highlighting that, compared to PBSA rents, the value of incentives such as cashback, discounts, and voucher packages has increased at a 15% annual rate since 2021. All room types and locations, including high-demand areas and traditional university hubs, are providing incentives to attract students. This is in response to increasing expenses and competitive booking patterns.
StudentCrowd’s research, based on vast amounts of real-time data from every PBSA in the United Kingdom, shows that 58,000 extra beds have been introduced to the market since 2021, with another 93,000 bedrooms awaiting approval for future construction. Simultaneously, the number of students increased by 16%, and their satisfaction ratings remained consistently high, averaging 4.37 out of 5. According to Knight Frank’s 2024 industry research, the gain has encouraged developers to continue spending. A record number of acquisitions worth hundreds of millions of pounds have been reported, including significant developments in cities such as Manchester and London. High rental yields and a continuing housing supply-and-demand mismatch, notwithstanding economic headwinds, are driving these investments.
However, affordability pressures in London have reached crisis proportions, making this market dynamic the most intense. According to recent data from Unipol and the Higher Education Policy Institute, the average annual rent for PBSA in London has grown by 18% over two academic years, reaching £13,595 in 2024-25, surpassing the maximum maintenance loan that students are eligible for. Rooms in the city might currently cost more than £20,000 a year. Students are experiencing significant financial hardship due to this sharp increase, which outpaces both inflation and scholarship assistance. Those in the know are concerned that the rising cost of living in the city would deter children from applying to universities, affecting their mental health.
The scarcity of housing is a significant factor in rising rents. Unite Group, the UK’s largest PBSA provider, wants to hike rents by 4-5% in 2025/26, citing high demand, a shortage of new buildings (which is still 60% below pre-pandemic levels), and rising operational costs (such as power and labor). For the forthcoming school year, Unite Group has experienced high pre-leasing and occupancy rates above 97%. Rising development costs—which have topped £100,000 per room—and the withdrawal of smaller landlords from student housing are worsening the deficit, forcing higher rents that can only be sustained in cities with already high private rental prices.
Several notable university-private cooperation have evolved as a result of the student housing sector’s growth and profitability. One such partnership is the £250 million agreement between Unite Students and Newcastle University to create approximately 750 beds. Others, such as the National Union of Students, argue that the student housing market is overly profit-driven, exacerbating affordability issues, particularly in cities like London. The mix of increased PBSA supplies, higher provider financial incentives, and rising rents creates a complex picture: the market is responding to demand through innovations and incentives, yet affordability remains a key concern for many UK families.
