Housed: The Shared Living Podcast
Sarah Canning and Deenie Lee of The Property Marketing Strategists have teamed up with Daniel Smith of Student Housing Consultancy to discuss the latest news, views and insights in the shared living sector.
Each episode they will be delving into a wide variety of subjects and asking the questions which aren't often asked.
This podcast is a must for anyone working in Student Accommodation, BTR, Co-Living, Operational Real Estate or Shared Living.
Housed: The Shared Living Podcast
Marketplace Challenges, Twin Rooms: The Missing Key to PBSA Affordability? Is dual occupancy really for two people? Why all the single occupancy studios?
This episode of Housed covers:
- Why twin rooms are rarely seen in PBSA?
- What a dual occupancy studio really means and why developers are building single occupancy coliving schemes
- Does the PBSA booking season look rosy?
- The conflict between investors and operators when it comes to positivity vs realism
- Dan is desperate to discuss the latest controversy with marketplaces
Plus Hollie Jordan-Wright from Howard Kennedy is back in our Ask the Expert feature to answer questions on The Renters' Rights Bill.
Thank you to our season four sponsors:
MyStudentHalls - Find your ideal student accommodation across the UK.
Utopi - The smart building platform helping real estate owners protect the value of their assets.
Washstation - Leading provider of laundry solutions for Communal and Campus living throughout the UK and Ireland.
Each week, Sarah Canning, Deenie Lee of The Property Marketing Strategists and Daniel Smith of RESI Consultancy will be delving into a wide variety of subjects and asking the questions that aren't often asked. This podcast is for anyone who works in Student Accommodation, BTR, Co-living, Later Living, university accommodation, Operational Real Estate or Shared Living.
Disclaimer: The views and opinions expressed in this podcast are the personal views of the individual hosts and guests.
Hello everyone and welcome back to Housed, the shared living podcast. This is the first episode in season four and we are delighted to be back once more with brand new content and new sponsors. But the same podcast hosts. So I'm Sarah Canning from the Property Marketing Strategists.
Speaker 2:I'm Dan Smith from Resi Consultancy.
Speaker 3:And I'm Dini Lee from the Property Marketing Strategists.
Speaker 1:Let's just have a word from our headline sponsor.
Speaker 4:Season 4 of Housed is sponsored by mystudenthallscom. List your properties, commission free and reach thousands of students searching for their university home.
Speaker 1:Dan and the team from my Student Halls have been supporters of Housed since the beginning and we are incredibly grateful that they are here once again as headline sponsors of season 4. The student accommodation listing site is easy for students to search and easy for operators to list. So if you haven't already, make sure you're listed on my student halls. Also, a huge thank you to our brand new sponsors, wash Station and Utopia. More from them later. Also later in this episode we will be hearing from Holly from Howard Kennedy, answering more of your questions about the renters rights bill. This topic inspired so many of you to get in touch to get your questions answered about the impact on renters, landlords and operators. So stay tuned until the end to hear from Holly. So we have had a couple of weeks off over the Easter period. What have you both been up to Trying?
Speaker 2:not to work, trying not to work, but failing dismally. To be completely honest, we took on a load of reports before we left for the Easter break, so I've been juggling childcare, the boys first ski holiday and doing a bit of work here and there, but very much back to it now and lots of exciting projects going on. How about you, deanie?
Speaker 3:Yeah, same failing miserably at the juggle, basically, of trying to be great at being a parent, great at trying to keep up with work and keeping up with life in general. So yeah, I'm kind of glad to be back to a little bit of normality and routine. Sarah, what do you get up to?
Speaker 1:I have a bit less of a juggle because my kids are older and my youngest just went feral. He enjoyed the sunshine and was out building dens and riding bike, which was really lovely for a load of teenagers. To be honest, I did a half marathon at the beginning of the Easter holidays, which seems like ages ago now, but it was the London Landmarks half marathon I ran it for versus arthritis. It was a fantastic event, really really good fun, brilliant day. I think I may have injured myself. My legs haven't quite been the same since, so I've had a little bit of enforced rest over the last couple of weeks, which is very unlike me, but I'm raring to get out and get running.
Speaker 2:I was going to say it's not like you to push yourself too hard, sarah, is it?
Speaker 1:I didn't listen to the warnings from everybody about overdoing it. But hey, I did it, I enjoyed it. I raised lots of money, so it wasdoing it, but hey. I did it, I enjoyed it. I raised lots of money, so it was worth it.
Speaker 1:So we left off at the end of last season brainstorming ways in how a more affordable rental product could be developed, and we had a really great response. It seemed to inspire quite a lot of people to debate the pros and cons of some of our ideas. One thing that we didn't cover in the last episode I actually posted about on LinkedIn over Easter, which is about twin rooms. I stayed in a hotel before the half marathon actually in London and the layout just kind of made me think actually this would work really well in twin rooms. So I posted about it and what I found really interesting is the universities were saying we do twin rooms, they work really well, they're a really great entry-level, affordable product, whereas the pbsa operators either stayed quiet or have said it doesn't work, don't even talk to me about it. So why are we seeing that discrepancy between universities offering it and then it disappearing when it comes to pbsa?
Speaker 3:honest answer. I don't know, but I think it's because pbsa just isn't brave enough to give it a go or do it right, or they've tried it with really old style rooms that aren't very modern, aren't very attractive, and have decided it doesn't work without actually thinking well, is there other ways to try this? And I guess it's that same old problem with PBSA is that there's a model that has worked for a relatively long time and people are scared to mess with that model. I don't know, but I think the evidence as we've said, sarah, our research shows time and time again that there is a market for shared rooms. Students are willing to share. The university tech sector is telling us that's willing to share. So there is. There is a product out there and a market out there for it, but we're just not seeing the innovation. I don't think If it ain't broke, don't fix it.
Speaker 2:I think that's one of the key issues that we have. It's a risk, let's be clear. It is a risk because it's fine to sell a single room where you don't have to then worry about roommate matching or any kind of issues throughout the tenancy. But when you do start having two people to put together that aren't there in the first instance, choosing the room together, that is a major issue. We're not talking about dual occupancy here. We're talking about twin rooms in particular, and I think that is a real concern.
Speaker 2:We also saw a shift away from the sort of dorm mentality in the US as well during COVID, where people wanted their own space. The universities couldn't sell double rooms or dorm rooms quite so well, so they were limiting the number of people and from what I've heard from operators and developers out in the US, that model is starting to now stick. So we're moving away from that dorms model in the US in particular. That's not going to help affordability and I think over here in the UK and also throughout parts of Europe, the focus is still very much on studios and on suites, partly because that's just what makes the numbers stack up, but it doesn't do anything for the affordability. So how can we think outside the box? What is there to do? I mean, it was the Crown Student Living guys who pioneered the 2DO concepts by all accounts, and I would like to see more operators be brave enough to try something along the lines of a twin room or some kind of 2DO concept, whatever it might be, I mean.
Speaker 2:I'm not sure we like that term, though, do we?
Speaker 1:Absolutely not. I think there's two things that I think that makes Twin Rooms. I guess, as Dean you said, a brave choice. I'm not sure it is a brave choice. I just don't think anyone's got it right.
Speaker 1:I think one is layout and one is affordability, and I think we see the same with 2DOs.
Speaker 1:I mean, I've worked for operators that have tried 2DOs and they feel very much crammed in. It doesn't feel like a type of flat type that has been well considered and well designed and usually what we've seen with 2DOs and in the very, very few twin rooms that I've seen, the price isn't right. So it's meant to be an entry level price product but the price doesn't reflect that. And arguments that I've heard from investors and developers in the past about 2DOs is well, you're sharing with less people, so it's a premium product and it's like, if any of you have ever been in a 2DO like it's not a premium product. You know at all. You know at all and I worked for an operator years ago that actually the studios were so unpopular that they basically took out the kind of dividing wall and made them massive studios because that's effectively you know what they were and they were able to charge a premium for the studio that they just weren't able to get with the twin rooms.
Speaker 2:That the old fire station in Birmingham, because I know that that had 2DOs, didn't it?
Speaker 1:It did. No, it wasn't that one. Actually, it was kind of predating that. But I think it's very easy for developers to say these things don't work when they've not been tried properly. And I think, as soon as you know marketing, you know, has the hard job of marketing these spaces. And if they don't believe in the space and they get given something like a 2DO which for any of you that aren't aware of kind of what a 2DO is, it's effectively kind of two bedrooms with a shared kitchen living area. I've never seen one that's got windows in or a sofa in, and usually the toilet is off the living area as well. So marketing are already up against it, knowing how to market it. They can't possibly market it as a the word studio, because it doesn't exist, it's a stupid word. So how do you describe it? Like a two-bedroom studio?
Speaker 3:because it's not really a flat, because it doesn't have any windows but also just to expand on your description, most of the studios I've been in, yes, they have a shared living space, but it's like it's worse than the galley kitchen, like it's. Most of them are literally just wall of kitchen and a breakfast bar on that same wall and a bit of kitchen and, no, you know, there's hardly any space to swing a cat in them. So they are really hard to sell and they are. And I think my issue with studios is that probably as a concept, they're probably a relatively good idea to have that kind of shared space, but there's just the shared space isn't enough to make it livable as a shared space. It's a functional space in lot and there's probably lots of studios I haven't seen and there might be some brilliant designs for studios out there, terminology aside, the ones I've seen is the problem is that that shared living space is really really small.
Speaker 2:I agree, that's what I've seen in the UK. In Europe I've seen bigger rooms, bigger studios with more social space. Let's just say so. You know, a nice sofa, tv, etc. Rather than just your dining table, your kitchen sofa, tv, et cetera, rather than just your dining table, your kitchen. So I think space is a bit more of a premium in the UK and that's something that we just need to be mindful of.
Speaker 2:But I remember at Nido we just struggled to fill the twin rooms. Even in West Hampstead, which was a super popular building, 100% occupied year on year. But it was always tricky to fill those twins. So it worried me when I had one person book a twin at any time in the market because I just didn't know if we were going to be able to match them up. So that was one of the key things.
Speaker 2:But there's some good roommate matching platforms now which I think operators could start using to actually help to develop that sort of twin room mentality that we can do it, we can deliver it. It will help things to be more affordable for students. I don't think twin rooms need to be seen as something to be avoided anymore, but that is only with certain amounts of technology, roommate matching and very careful thoughts. So it's not just a case of okay, I've got a decent amount of space, let's just stick a twin room in there and go for it. It does take a lot more planning and thought, but the technology is out there to help with roommate matching. Some of the PMSs have it, some of the other platforms that are specific for roommate matching. They work as well, and universities are pioneering that more than pbsa providers are.
Speaker 3:I think because of the, they're able to take more risk but also is part of this problem, is because pbsa isn't very good at selling to groups of people, so the instant thought is actually I need to sell to individual people, whereas actually the optimum way is to sell it to two people who have shared, potentially, in a university or have met in a university and are willing to keep the cost downs and share, because they know each other, with a design that gives them a sense of privacy in certain areas and therefore, yes, there is roommate matching, but then there's not a risk, is it, if you're just selling to two friends who actually want to choose to live together. But we don't do that very well and that's part of the issue, one of the things that we've said time and time again and we still don't have systems that enable us to do that very well be developed and built for an affordable student in mind.
Speaker 1:This shouldn't be about vanity and showing off your portfolio and how amazing and how fancy your rooms are and how much rent you can charge. They serve a purpose and that purpose is that some students won't be able to live away at university unless they can afford somewhere to live. And if you get the design right and you get the price right, then it enables some students to do that, and our research shows that students are willing to compromise if it means they get to go to university. Isn't that a great place for any developer to be in? It doesn't have to be the whole building. It could be five twin rooms, you know, and that means that 10 people can live at an entry level rent and, you know, live the life that they've wanted to in a twin room.
Speaker 1:I think the other thing that strikes me about co-living. So I saw over the weekend that a co-living scheme in London had been given planning permission, but only for single occupancy studios, and I think it was about 300 flats, and I just thought if it's single occupancy, how sustainable is that? You know, what kind of a community can they create? And I think it's single occupancy, how sustainable is that? You know, what kind of a community can they create? And I think it's all very well that the council, who gave planning permission, and the developers that have created it are saying it's single occupancy but at the end of the day, it's the operator that's going to have to deal with all sorts of carnage of people trying to live with their partners potentially in a single occupancy building and also marketing, having to market something that's potentially really really hard. I don't know.
Speaker 1:Again, I feel like there's an entry-level studio situation that could be for single occupancy and they could be really small studios, but surely there's space in a building to have bigger studios with maybe two wardrobes, you know, and two armchairs etc. That are for people who have partners that they want to share with and then they get to live in the building for longer and they create like an ecosystem community where people can upgrade. What do you guys think about that?
Speaker 2:really clear. It's bloody stupid, like it is ridiculous to put any kind of limits on whether you can bring a partner into a co-living space. I think that's preposterous. We're doing some work at the moment with a London borough setting out their well doing a needs analysis for them in terms of their student housing, and that is certainly not one of the measures that we will be recommending when it comes to co-living. Of course, now with student needs needs analysis, we now have to factor in co-living BTR and of course, we're looking at the student HMO market too, but that just for me seems like overreach and is absolutely ridiculous. I would expect the operator to be flouting that pretty quickly and appealing to the council. Let's hope that isn't something that takes off. If any councils or boroughs are listening or any planners, please don't keep putting that in, because it makes absolutely no sense from our side of things whatsoever.
Speaker 3:It doesn't feel like it would solve anyone's housing situation to have a big block of single occupancy and in a world where we need to be sustainable with our buildings and have a degree of flexibility, it just seems madness to me.
Speaker 2:It does, but I think what they're trying to do is say look, you can't keep giving these little box rooms to people and then expecting two of them to live there. I kind of get that, but again, it's overreach, like these properties that do that. If you have absolute box rooms and you're still expecting two people to live there, then your reviews aren't going to be particularly good, unless your pricing is perfect for the size of the room and you're offering good affordability. And if your reviews aren't good, you aren't going to get that many people living there. So I think let that be a bit of self-governance there. Um, please don't. You know, I don't want planning departments to be overreaching in any way, shape or form, but especially not when it comes to how many people and who can live in a building.
Speaker 1:We've done some research with universities about why some of their students are choosing not to live on campus, and actually not being able to live with your partner in university accommodation was a very, very strong reason why people aren't choosing to live in university halls. So you know that it's exactly the same in co-living and you know somebody might move into co-living and be single but at some point they may no longer be single and they're going to want to live with that partner and, as dean he said, it doesn't then solve the housing crisis if people have got to constantly keep moving and keep moving. There should be a building where there are single occupancy studios because they're entry level and people understand that they're paying a cheaper price for a smaller product with those restrictions, but then there should be reasons and ways for them to kind of move up through the building as their life changes, and that creates a sustainable community.
Speaker 2:I don't even know if we should have those single studios. I think if you feel like you can fit two people in there and it's a co-living building we're not talking about PBSA here, we're talking primarily about co-living then the way I see it, that's up to you. Now, obviously, if you start saying, well, hang on, there's going to be three, four, five of us living in a studio. That's a very different matter. But I think you know. I think that's where just a bit of common sense comes in. And I do appreciate that we do need that affordable level. But that doesn't necessarily have to be governed by space and even if it is, it's up to the tenant as to whether they feel that they can live there with their partner or not. And that should be again self-governed by reviews and practicality.
Speaker 2:And we see in HMOs there are sometimes far too many people living in HMOs. They don't necessarily get the quality of life that they really want. I've seen that firsthand in PBSA with some student HMOs. That fine for 10 people, but there's 30 people living there and that's rife with international students and in particular Nigerian and Indian students is where I found that's most prevalent. But that's a very different kettle of fish. That's a real serious affordability crisis.
Speaker 1:I was going to say the most affordable studio is one that you can share the rent with. So if you're in single occupancy and the rent is 800 pound a month, then actually if it was bigger it might be a thousand pound a month, but actually that would be 500 pound each. So it becomes that affordable product. And if people choose not to share that rent with a partner, then they know exactly kind of what they're they're getting into. Yeah, I just think it's and I don't know why it is. Is it because the councils don't want a building that they've given permission to 300 people living there? The 300 people become 600 people.
Speaker 2:Pretty much that, because then that starts overloading the transport systems and their local healthcare and the schools or whatever it might be. So I do understand that they want there to be that kind of limit there. I think it's probably focused on welfare of the resident. You know, if you've got box rooms, then do you want two people living in a box room? No, probably not, and I do understand that. But equally that's not their decision to make. That's the way I see it. It's the resident's decision and the operator's decision to make as to what they can do. But I do think that the councils are looking out for residents there. But it feels like overreach from my point of view. And the moment that you start dictating, well, you can't have more than two people in this room, you start dramatically affecting what a community is and what the potential firstly, investor returns are, but secondly, how that community ultimately flourishes. Should we say you want a mix of people typically and you're not going to get that if you just have single people in box rooms.
Speaker 3:But also co-living, and BTR should be there to give people options other than just buying. But actually it's a lifelong renting that you can stay there as long as you want and life changes and you might very well be happy in your co-living situation, but then you might have a child that you might not live with the the other parent, you might be co-parenting, and what do you do? You've got to move out because you can't have your child to come and stay. I just think there's there's things like that that actually the world isn't square of circle or round. It's all different and there's lots of different scenarios. So I just think, if we're trying to create communities and we're trying to create homes that people feel that they can stay in, we need to give flexibility to whatever pops up in their lives um, just as an aside, I also have an issue with dual occupancy studios in PBSA, because I don't think they're designed for dual occupancy.
Speaker 1:They're just bigger and people say they can be dual occupancy. But I would really, really love to see purpose-built, designed studios for two people to comfortably live in and that would be two wardrobes, two desks, two chairs, know the bed in the middle, so that people can, you know, get out of bed, with bedside tables on each side and it not be against a wall.
Speaker 2:I think generally what we're saying is the sector should do better for sharers that is such a great shout, and show me a pbsa with an actual double bed, not a three-quarter bed or a queen bed. I don't know of any. Please do correct us if you do know of any. I think that dual occupancy, double occupancy in PBSA, is primarily a way to jack rents up by 20% or so between 10% and 20%, I think most probably choose 15% as an increase and there's not that much dramatic impact on on the actual services because no one's providing food etc. Like you're not. You're not costing a huge amount extra, so it's just a way, a little bit of an extra money spinner for pbsa.
Speaker 1:To be completely honest, actually, what I have thought would impact it if you increase the occupancy is laundry, which is quite interesting because I was just about to introduce one of our brand new sponsors, wash Station.
Speaker 1:But we do know that building with a communal laundry has to provide a certain number of washers and dryers depending on the number of people living there. So I guess the only way around that is that each flat or in co-living quite often you have kitchens on a floor with their own laundry is rather is take away that communal laundry situation or over specify the laundry room you know, or you, if you're having dual occupancy, then you have a number and you specify the laundry for that number, and it might be. Actually, you know, a third of all our rooms are suitable for dual occupancy and the other ones aren't, and I think people understand that, and and there has to be an ultimate optimum capacity for a building that has to work. So we'll keep an eye on that situation, particularly around co-living. So I've teased it. So now we are going to hear from one of our brand new sponsors.
Speaker 4:Wash Station proudly sponsor this episode of Housed. We provide best in class laundry solutions that complement your buildings. Washstation Smart, green, clean.
Speaker 1:Thank you so much to WashStation and we've enjoyed some really interesting conversations and no doubt the conversation we just had will provoke more interesting debate about laundry. So make sure that you get in touch with them if you are an operator of shared living spaces. So, Dan, before Easter you asked the LinkedIn community how they thought the season was performing in regard to bookings for next year. What was the result of the poll?
Speaker 2:I did. Yeah, I'm going to rattle through this because I'm desperate to talk about marketplaces as well at the moment. So I did a poll, effectively saying do you think PBSA sales velocity pick up later in the market? 2025 is a later market or no numbers will be down were the answer options. 60% of people said no numbers will be down. 40% of people said yes, 2025 is a later market, and personally I think the answer is both. I do think it is going to be a later market.
Speaker 2:I think students are more savvy. They are waiting. International students are all over the place because of the Trump effect which is definitely coming into play with certain students, chinese in particular, as to whether they want to study in the US, with the visa restrictions and the university and international student restrictions in Australia. So there's loads at play here. But what was fascinating is that there are 128 responses to that, which is about normal. Normally you get sort of 150, 200 or so. I never. I always anonymise them, but in terms of who is the most optimistic shock horror it's the agents. So all of your typical commercial agents have said oh no, the booking market is just down. So they're always going to top the optimism charts. There it's. It's in their interest to. They get paid if they sell a property or a property gets developed. So I'm not surprised there.
Speaker 2:Investors 77 think it's late, and so I think there is a bit of a disconnect between them and operators, because 72% of operators think the market is down and 69% of the on-site teams think the market is down as well.
Speaker 2:So then you compare that to universities 95% of the university contacts and that's typically it was residential heads of student experience think that student numbers are down and they are the canaries in the coal mine, let's be honest as well as the marketplaces and agents, where 63% of those believe numbers are down.
Speaker 2:So yeah, in in my opinion, I think we are looking at a later and lower market. I don't think the numbers will be anything drastic in terms of the drops, but it's going to be pretty scary in some locations, particularly in the regional markets or some of those markets where there is significant supply, where the market will be that much later, and I think investors will really have to hold onto their hats and keep their nerve to stop giving away these gigantic cashbacks that we saw at the end of last year. So yeah, it's going to be really interesting. The sentiment is quite clearly the fact that it's going to be a lower market and potentially a slower market. That's what I'm seeing so far. How are you guys seeing it with the client work that you're doing, of course, and just generally in conversations with people in the market?
Speaker 3:I think, similar to the people you polled, is that it's a different market again and it's slow. I think it's slow in most locations and, yeah, it's a struggle. And I think the biggest thing for me, when you kind of shared those stats from the different different sectors, is that disconnect between investors and those that are largely, as you say, the ones speaking to people doing the doing. And that worries me, because this is what happens is that you'll get operators and saying to investors we need to, we're not where we need to be, we need to do something about it Investors saying, no, it's just a late market, it's just a late market, stick with it. And that's where we end up with these horrible massive discounts at the end which benefit no one. And that I think that is what's been playing out. Your poll shows what's been playing out over the last few years and, unfortunately, still playing out, and that makes it really hard for operators to have those honest conversations and say look, you know, we think something's different here. We need to act now.
Speaker 1:But I think that's true, and but what we often hear from operators is that they try and have those conversations with investors. They are quite honest and they're not listened to. You know. They're telling them that the prices are too high at the beginning. They're telling them, through rent setting, that the prices are too high. And the investors aren't listening to them, you know, and that's why they're sticking as long as they can. But like you said, deanie, I'm sure we'll see the prices drop again at the end of the season.
Speaker 2:That's brilliant for both of us in terms of the consultancy that we do. I mean because those assets that haven't, or those investors that haven't listened to their operators, they're going to need some help later in the market with their marketing plans and their sales strategy and potential training etc. And with resi consultancy, we oversee that relationship between investor and operating. We manage that communication, both up and down, and the reporting and the rent setting and there setting and there is a real gap between expectations and delivery, and that's what we're there to kind of help manage. So it plays into our hands quite nicely. I knew it would. That's one of the reasons that I did the poll, because I knew there was a massive gap between what the investors think is going on in the markets and what the operators are actually seeing going on in the markets. That's not to say there's fault in either way. It's typically both sides and and I think there's there's a lot that needs to be done, closing that gap between investors and operators. And and that's kind of what we're, what we're all here to do, to be honest with you, to really talk it, but you've just got to start.
Speaker 2:If you're an investor, you've really got to start getting to grips with the sales velocity, in particular, based on year on years. You cannot rely on trends post-COVID. This is the trouble, because we're in a new norm now Everyone Unite, empiric, all of the people that have the release reports. They're calling this a normalisation of demand being 9% to 16% behind year on year in terms of their sales velocity. When the big guns are saying that, then that's typically a problem for everyone else, but that message hasn't necessarily been fed back to the investors or hasn't been taken on board by the investors. Really interesting market at the moment. Lots of miscommunication as far as I can see.
Speaker 1:I read Mark Horver from Data HE and he said, based on numbers, he's expecting conservative increases in overseas and UK students. So that's great. So they're increases nonetheless, but they are small. But interestingly, he is suggesting that universities might be more aggressive in their acceptances of UK 18 year olds and while this might seem like a great idea for accommodation, there's warning bells and there's nuances and that has to be communicated back to investors because not all of those students will move away from their family home. So you can have all the UK 18 year olds you know that you want, but if they can't afford to live in accommodation and they won't, you know they have an option. You know we're in a cost of living situation, we're in a housing crisis and also, generally speaking, we're not seeing a return to full time on campus learning expectations. And this is where we see quite a disconnect between a kind of university strategy and an accommodation strategy.
Speaker 1:A lot of universities only expect students to be on campus two to three days a week, so commuting is a realistic option for those students. And also the other warning sign I think that we see is that, whilst universities, most of them will accommodate their first year domestic students on campus. What does it mean in years two and three? Because if they can't then find a comparable place to live, then they might drop out or they might move back home or they might change courses Like for like.
Speaker 1:If you're doing a competitor analysis, the weekly rent between university and PBSA is not that much different. Generally speaking. That's not the issue. I think the issue is the contract lengths. You know, universities you can live for 36, 38 weeks. Hmos, as we know, you will be able to live for 36, 38 weeks, but PBSA, you know, some of them are 44, 46 or even 51 week contracts. I think in 2027, we're going to have to see a more pragmatic approach to contract lengths Because otherwise those domestic students might drop out the university, revert to commuting if they can't find anywhere affordable to live.
Speaker 3:in years two and three absolutely great and I think this is the thing is that there's so many different things impacting who's going to university, why they're going to university and what they can afford to live, which is why we just need to to listen to each other and develop a strategy that is is able to pivot and adapt, because there's so many things impacting the market right now that we've got no control of and that we can't fix ultimately, quickly.
Speaker 1:I was talking to a mum, a parent of one of my son's football mates, who've got a daughter going to university this September and they've narrowed it down to Nottingham, trent or Coventry from a course point of view, but when they looked at accommodation prices they were so vastly different between Nottingham, trent or Coventry from a course point of view, but when they looked at accommodation prices they were so vastly different between Nottingham and Coventry. You know that that is their deciding factor. So there are people that are kind of almost, you know, disregarding the quality of the course because it's irrelevant. If they can't afford to live in a city, they can't afford to live in a city. You know they will go to a cheaper city with cheaper accommodation. Ok, now we are going to hear from Utopia.
Speaker 3:This episode is brought to you by Utopia, the smart building platform that helps real estate owners protect the value of their assets.
Speaker 2:From ESG compliance to energy efficiency and resident engagement. Utopia turns realtime data into action, making buildings better for people, planet and profit.
Speaker 1:If you're in asset management or operations and care about performance, utopia is your essential partner. Find out more at utopiacouk. That's U-T-O-P-Icouk. So, dan, I know you've been itching to talk about this, so we've kept you hanging for nearly the whole episode. So we've been discussing the uncertainty of the season and is this playing into the hands of the marketplaces? So what are you seeing? What is it that you are so desperate to share with us?
Speaker 2:So I want to get the balance right here in the way that I talk about PBSA marketplaces and the way that they work with PBSA operators, way that I talk about PBSA marketplaces and the way that they work with PBSA operators. It's not easy, and I have a very unique position in that I have either worked in or with marketplaces for upwards of 10 years. I've seen the industry from the very start and I can see the value that it plays. I've come from the travel industry originally, before PBSA yes, there was a time pre-PBSA for me and so I know that marketplaces are incredibly important and they've tried to carve a niche, and they have carved a niche for themselves within PBSA extremely successfully in one sense. But equally, I know that there is quite a lot of suspicion and annoyance and frustration with the way some marketplaces work. There always has been. That's nothing new. But I just wanted to address some of the things that I'm seeing in the market at the moment, that some of them are positive, some of them are negative. What I'm going to focus on here is some of the potential challenges that I think we need to be working on as a sector, and hopefully we can start some discussions and maybe come to some kind of solution here that will hold marketplaces and operators to account and lead to a more harmonious relationship, something that works in the best interest of the students and ultimately, the best interest of both the operators and the marketplaces. So I'm trying to create a level playing field here and be objective.
Speaker 2:So where I come at this from is because last week I had more calls than I ever have about one particular post and that was Jason Yin's post from U-Homes. He's the founder of U-Homes and U-Homes is the biggest international student accommodation marketplace. They place around 40,000 to 50,000 students into UK student accommodation every year. You will all know of them Primarily Chinese students, about 96% or so maybe more Chinese students that they are placing. So really useful to be able to have that increased reach into China through U-Homes. There are other marketplaces available. U-homes have done a brilliant job of completely dominating the Chinese market and have forced other players completely out of the sector and out of the market and they are very much a long-term partner.
Speaker 2:Now Jason's post was talking about the algorithm that they use to do their rankings. Now, just to be clear, that effectively means that a student and roughly 90 plus percent in my experience of students will go onto a marketplace website, have a look at a city page or a university page and look at the rankings, and then they'll typically go for the first you know one to five properties to try and compare them, but they may go a little bit beyond that too. Now, that is huge power, just like it is with Google, where you know, effectively, if you're on that first page, you are owning some seriously powerful digital real estate. There on Google, it's exactly the same with the likes of U-Homes or Fun Living or All Homes or whoever that is. You know, for the Chinese marketplaces that is.
Speaker 2:Of course, other marketplaces are available, but it's extremely powerful and so, of course, there is a way to monetize that and obviously, in you know good times and and bad times, operators want to be at the top of that rankings. Now, how do you do those rankings? How do you set those? Set those rankings? Well, jason and you homes are now being open about this with partners and saying that there is going to be a must stay list, which is effectively the top-ranked properties, and they are explaining how the rankings are done. Now, according to Jason, this is exclusive incentives, so properties offering high commissions, exclusive listings or special offers that supposedly strengthen the partnership will be pushed up the rankings. Strengthen the partnership will be pushed up the rankings. An advertising presence so properties that are paying to advertise and list effectively to push their properties up the rankings. And also the performance track record so popular, well-performing properties that build trust and attract students, they are going to be pushed up the rankings too.
Speaker 2:Now that is good, that there's a bit more transparency about marketplace rankings, because every marketplace has a ranking system. I've put some in place at several different marketplaces and they revolve around, typically, conversion rate for that particular property, number of bookings, overall general relationship. You know, does the marketplace actually like the person or people that they're dealing with at the operator? Is the general manager any good? Is the partnerships manager any good? Do they pay on time? Do they reconcile? Do you have to fight tooth and nail for every single booking? What's the booking system that they're using? Is it integrated or is it manual? Is it excel sheets, like all of these things should come into play. So being a bit more open about the algorithm is great.
Speaker 2:Now, obviously, what we're seeing in the marketplaces as a whole is a big pivot towards ideally front loading your revenue model, and by that I mean. Well, previously, a lot of marketplaces have had to rely on getting paid after the student has checked in, maybe six months, maybe even a year after the student has checked in. That's not sustainable, it never has been, and that's partly why some marketplaces have gone to the wall or at least have had to completely pivot. So I think that what we're seeing now is a hybrid model and I've seen it with Amber, I've seen it with you homes, I've seen it with various others to where you're having to pay to list your list your property effectively. So you've got a hybrid listing platform and commission based marketplace, and that is a very interesting proposition and I and one that I think that operators are struggling to really get comfortable with.
Speaker 2:And I speak to operators that are spending tens of thousands or hundreds of thousands at times with some of these major marketplaces to really push their properties up the rankings. Great for the marketplaces, because they don't just have to rely on selling, they don't have to keep staffing up these gigantic sales teams. They can take money up front as effectively a listing platform. But it does change the value proposition of the company completely, because a lot of operators have been relying on marketplaces to act as an extension of their sales team to really understand what will sell the property in particular. Understand what will sell the property in particular when you become more of a sort of listing platform and it becomes more of just about a rankings play, that is. That is very different. It becomes less about what the student wants and less about pushing people to filters to actually filter exactly what they want and more about who's paying us the most money. So being open about some of these characteristics of the algorithms is good. I would like to dig deeper into some of that, some of what I know that you homes are pushing out to try and push this sort of ranking system a bit more.
Speaker 2:My concern is with the exclusivity piece. I worry that if marketplaces and this isn't just you homes and you homes it may not be the case that this is what they're asking for. I have spoken to Jason and some of what he's putting out there is commercially sensitive, so he can't sort of explain absolutely everything about the algorithm. But I worry that if marketplaces are saying you must list, operators must list exclusively with them as a marketplace, that that's anti-competitive. That's my thoughts on it. I think it is anti-competitive. If you're asked by a marketplace to not list anywhere else, then that's not good for the student. I don't think it's good for the property either. It puts all your eggs in one basket, which is a real risk. And we are seeing more marketplaces pop up, in particular from China, which is quite interesting, and that may be one of the reasons that you know U-Homes is taking this sort of strategic move. But if any marketplace is saying you should be listing exclusively with us, I don't like that at all and I'm not saying that you homes are requesting that, but just be wary that that is, in my opinion. I think that's anti-competitive. I think the competition commission in the UK would have something to say about that. To be completely honest Now, what Jason in particular is saying here is that the reason that he's asking for you know this deeper partnership effectively is to stop the cashbacks and I don't just mean the cashbacks that operators are putting in place in you know various different cities where you might get one and a half grand off of booking your room just because it's later in the season or whatever it might be.
Speaker 2:I'm talking about cashbacks offered by marketplaces just to poach students away from booking directly with the operator or from booking directly with another marketplace. I see it time and time again on a daily basis with client work that marketplaces are being incredibly aggressive about poaching students and I choose my words very carefully. They are poaching students by then saying to the student don't book direct with the operator, come with us, we'll give you an extra 300 pounds, 200 pounds, whatever it might be Effectively an incentive to book. That isn't coming from the operator, it's coming directly from the marketplace and they are taking that cash back from their commission. So I think that is dangerous.
Speaker 2:I really don't like it. I see it on a lot of different marketplaces and I think that that is a race to the bottom. No one is going to make any money there. It's going to cost the marketplace all of their profit in terms of the commission, because they're just giving it away. If you're giving away 300 pounds in terms of the commission because they're just giving it away, if you're giving away 300 pounds and I've seen marketplaces give away 500 pounds no problem at all. If you're giving that away, that's coming out of your commission, you're earning next to nothing, and so that's not sustainable. But I see it frequently, whether it's 20 pounds, whether it's 50 pounds, whether it's 200, 300, 500 pounds. I just don't like it. It is poaching. And then I see the follow-ups. I see the emails from the marketplaces that say to the student don't bother booking direct with the operator, even though you're already in contact with them. Book directly with us and we'll give you an extra 200, 300 pounds. Just don't like it. It's not good for the relationship, it's not good for the industry's not good for the industry really needs to stop. So I would just say that everybody should be every operator should be requesting that their marketplace doesn't do commission for the sake of commission. So that's a big problem. Now you know these, these algorithms. They are opaque. That we are seeing.
Speaker 2:It isn't straightforward as to what increases the rankings. I would just encourage operators to be asking specifically about what would get them pushed up rankings, because everybody wants to be higher up the rankings. Of course, it shouldn't just be about who pays the most commission. It should be a bit more of a balanced approach. Every marketplace is different, though, and it's up to them as to how they run their business. All we can do and all I can do, is, as a consultant, an advisor to various different operators is to say look, let's take a balanced approach to this. Yes, we need to be higher up the rankings because we know that will work, but what does this mean long term? And what does this mean long term and what does this mean for for us in terms of our revenue as well? Because it shouldn't just be that you're paying the same amount in commission on an annual basis as you are in upfront payments to the marketplaces. So I definitely would just encourage more conversation about this and I want marketplaces to be more open about it, for sure.
Speaker 2:While we're on the subject of some challenging points on marketplaces, a lot of them are still charging students, and I want to be really clear here. That is illegal. We know it is. We've taken legal advice. We know that that is illegal. Again, if you are speaking to your marketplace, just ensure that they aren't charging the student. There is no reason that they should be. It goes against the Tenant Fees Act of 2018, and that is still very much in play. We've got to make sure that we are holding them to account, because they shouldn't be charging it. Wherever the entity is, the assets that they are charging on behalf of are in the UK and therefore it needs to adhere to UK law. So, whether it's an Indian entity, a Chinese entity or anywhere else, every marketplace should be adhering to that. So that's definitely something that I think we need to start getting a lot hotter on and calling people out.
Speaker 2:Each time that I speak to marketplaces, there's always a bit of a wishy conversation saying, oh yeah, but you know what if we do the transfers and whatever? No, I think, if accommodation is involved, I don't think you should be charging any kind of booking fee in that whatsoever. It's just something that really needs to be stamped out, and that is, you know, all operators feel the same there. So it's absolutely key that we do stamp that out, and it's still some of the big marketplaces that are charging, so it's definitely time to start holding them to account. And then, lastly, it's the bidding on Google Ads and driving up the cost per acquisition for operators. I really still struggle with that, especially because you know, on a non-permission basis, if an operator doesn't care. If, um, a marketplace is bidding on brand or property keywords, then fair enough, that's entirely up to them. Uh, but it's the underhanded tactics that I'm still seeing right now. I have several clients that I work with and they are battling marketplaces who are conveniently forgetting that they've turned back on their PPC for brand and property keywords. So, again, just something to stop and challenge.
Speaker 2:I think I don't think any of this is accidental. I do think there's a lot of yeah, effectively trying to drive the best revenue for the marketplace, of course, because most of them are now very focused on that. It's gone beyond the hey, we're just long-term relationship building and now like okay, we've had investment for a little while now. We now need to really show some results. And those results won't come in the US. As I've said before, no one's going to be able to crack that. It's very difficult to crack the HMO market. So how can they leverage as much as they can from PBSA? Totally get that, it's capitalism, it is going to be a commercial approach. But I just worry that we're starting to fall foul once again.
Speaker 2:Beyond the fake booking scandal that we sort of exposed last year and the high cancellation rates, the relationships are starting to suffer and the marketplaces are now in a position where some of them are just I don't want to say too powerful, but they are just, they're indispensable, and that's clever and it's how I would have positioned myself if I was running a marketplace. But I don't think it should be power at all costs and revenue at all costs, and I do think there needs to be some kind of re-evaluation of relationships with some of the marketplaces anyway. So this was really sort of an opportunity for me to just give a bit of an update on what I'm seeing in the industry with regards to marketplaces. I don't it's certainly not all challenging, it's not all bad. They're doing, you know, great work in a lot of different places with a lot of operators, lot of different places with a lot of operators, and I still massively see the value that marketplaces can add.
Speaker 2:However, I do think it's time that there is some kind of marketplace or agent code of conduct, and that would just nip a few challenges and problems in the bud. It would hold marketplaces and operators to account in the way that they work together, and I'm talking things like making sure that payments are done on time by the operators and that reconciliations are reasonably handled, but also then making sure that marketplaces don't overreach, that they're not poaching, that those cashback incentives aren't just poaching students away from booking direct for the sake of it, that there's not double dipping too much in terms of how much the upfront payments are and you can't. There's only so much you can do with getting involved with the commercial models of some marketplaces. That's fine. They're all going to be different at different times. But I do think that we need some kind of checks and balances there. And in particular on the exclusivity piece. Like I said, I just don't like that. If a marketplace is asking for exclusivity and not listing on other marketplaces, that's a risk first and foremost for the operator, but secondly, I just feel that's anti-competitive, and there are enough marketplaces out there doing a really good job that will definitely make sure that they can fill those beds alongside some of the bigger marketplaces too.
Speaker 2:So I'm not saying that I will be leading the charge on any kind of code of conduct. I'm having conversations with certain bodies about that. So watch this space. Hopefully something will materialize in some way, shape or form. Hopefully something will materialize in some way, shape or form, whether it's through us at Housed or through Resi Consultancy or potentially through ISEP or Unipol or whoever.
Speaker 2:We just need to make sure that we have a mutually beneficial relationship, because marketplaces have a lot of value to add and operators are, especially at the moment very much in need of working with them, but we need some checks and balances, we need some accountability and we, in my opinion, need a code of conduct. That's my 10 pence worth. Do reach out to us at hello at housedpodcastcom if you have any thoughts on it, or find me on LinkedIn. I don't think you'll have any problem finding me on LinkedIn, but I'd love to hear your thoughts on this. Whether you're a marketplace or an operator, I'm really keen to start to get something underway that will benefit both marketplaces and the PBSA sector. So watch this space, but do also get in touch that's really interesting.
Speaker 1:Thank you for sharing it and bringing our attention and, like you say, it's one that we need to watch out for. I, as you were talking, I was thinking of what a comparable is. You know, is this like right move, saying you can list with right move but you can't be on any? You know any other. You know listing platform and basically. So it's taking somebody that already has dominance to eradicate the competition effectively, and that would never be allowed. It just wouldn't.
Speaker 1:So why should it be different in this situation? And we just have to go back to, like you said, what is best for operators and what is best for students as well is best for operators and what is best for students as well, because if people are listing exclusively with U-Homes, with exclusive discounts, it's stopping the students having any choice as well. When Dean and I work with clients on their marketing strategies not for all, but for quite a lot we do try and explore the benefits of marketing directly in China and creating brand loyalty and brand presence. You know, offering back and reducing that reliance on agents. You know, we would much rather see the sector going that way rather than putting all your reliance in agents. There is another way to do it and we've seen it work really really well.
Speaker 2:I totally agree. I just you've got to have that diversified demographic and a diversified source base in terms of where they're coming from and how they're booking, what channel are they booking through, and and I think that some operators just got a bit lazy in times of where it was absolutely a little bit more difficult to fill. It was like, right, well, a marketplace is 20 percent. I saw 22 percent commission last year, but actually I know that there was and that was, I saw that firsthand, but I know that there was actually a lot higher, which is just horrifying. So we do, we do need checks and balances here.
Speaker 2:I just don't know what form that takes, and I think that that's where we need to have a really open discussion with the entire sector marketplaces included, you, homes included to say, right, where are we all trying to get to? How's this going to benefit the student? How's it going to benefit us? How can we make this more of a mutually beneficial relationship that isn't isn't so reliant on? You know, in good times for operators, you don't need marketplaces, and in bad times you do like there has to be a middle ground here, like we have to be working, thinking about what marketplaces need, thinking about what operators need and want. So there's, there's something here. We'll pull up this thread a bit more like it. Like I said, I'm really keen again just to say that we're not saying you homes are bad, far from it. Like they deliver bookings, we know they do. I am just concerned about what this means for anti-competitive practices. I mean, the Monopolies Commission may want to take a look at this in some way, shape or form, but equally, does that matter for a Chinese entity? I don't really think it does, and it's just something to be really mindful of.
Speaker 1:Great. Thank you very much, Dan. We'll keep a close eye on it and we'd love to hear your feedback. For anyone that's listening that's been impacted by this. And now we are excited to be joined by Holly Jordan-Wright from Howard Kennedy with our latest installment of questions about the renter's rights bill.
Speaker 5:As one of the UK's largest real estate legal teams, howard Kennedy brings deep industry insight and commercial solutions to support clients in an ever-evolving real estate landscape.
Speaker 1:We deliver tailored solutions that help our clients realise their goals, working in close collaboration to navigate every stage of the property life cycle okay, I would love to welcome to housed holly jordan, right again from howard kennedy, and she joined us a few weeks ago to discuss the renter's rights bill and because we had so many questions from our lovely listeners, we have have invited Holly back again, so we're going to head straight in with some more questions. So we've got a really interesting one from John Hammond from Zero Deposit, who's highlighted the fact that in PBSA and BTR the operators plan and forecast well ahead based on the potential income that they're going to be achieving from 12 to 18 month tenancies. But if a tenancy can be can end after three months, can they adjust the pricing to reflect potential voids? Because obviously that's part of the renters rights bill that's coming through. Is that restriction in increasing prices?
Speaker 4:yeah. So hi, sarah, really nice to be back again. It's a really great question. It's one that we are hearing a lot at the moment. So assured tenancies for the pbsa sector would make it almost impossible for student housing suppliers to rent properties in line with the academic year. This rightly raises fears about the longer term supply of housing availability, particularly at a time when there are already student housing shortages.
Speaker 4:Now, if there's no exemption brought in for pbsa, or if we're talking about the build to rent sector, which isn't proposed to be exempt, then understanding what you can and can't do is really key. So at the start of the tenancy, the renter's rights bill limits the amount of rent that a landlord can require to a maximum of one month. So you can't demand more than one month rent plus the deposit up front, and if you do, it will be a breach of the tenant fees act. When advertising a property, you must state the rent and rental bidding is banned and there are fine for breaches of those provisions. So you can't do it Now. You could set the initial rent higher to offset any void periods, but if that rent is above market, then you're less likely to attract tenants, and although what we actually think might happen is that rent could increase if landlords leave the sector and reduce the overall housing stock, so that may be a natural byproduct of the renters rights bill.
Speaker 4:Now there are restrictions could increase if landlords leave the sector and reduce the overall housing stock, so that may be a natural by-product of the renter's rights bill.
Speaker 4:Now there are restrictions on rent increases once a tenancy has started and they are limited to once per year and any increase must be capped at the market rent, which could be up or down, and there's a statutory notice procedure that has to be followed and a tenant can challenge the rent increase by making an application to the tribunal.
Speaker 4:Now rent increases can be delayed by this process because they aren't backdated and the tribunal can defer the decision for a further two months depending on the tenant's circumstances.
Speaker 4:Now, as the tribunal is a no-cost forum, each party generally bears their own costs, apart from in exceptional circumstances, we expect more tenants will actually challenge rent increases, which could see processing times in the tribunal delayed even more as they deal with more cases. Now we anticipate for operators in the built to rent and the PBSA sectors that they're going to see an increase in administrative and management costs because of these new regulations, possibly an increase in legal costs if they're seeking possession through the courts because of the longer processing times. As we talk about less certainty around income, difficulty in predicting void periods, but we think that those providing high quality accommodation can generally expect to be in demand and with less void periods overall and that overall it will see an increase in demand that will see rents go higher. So I don't think it's all bad news and whilst rents could be adjusted accordingly to reflect the difficulty of predicting void periods, it may not be necessary as it may just be a natural byproduct of the bill anyway.
Speaker 1:Thank you, holly. That's a really good point that you made as well about the additional administration and management costs. I think that's a really kind of practical takeaway for our audience. I have got a question from Charlotte Boilo from University of Southampton. We may have covered it previously with you, but I think it's worth highlighting. She says, because she works for the University of Southampton, they own, not lease, houses that they're then rented out on ASTs to PhD students with families, even though they've traditionally on ASTs to PhD students with families, even though they've traditionally issued ASTs, would they be exempt from the renters rights bill as a university?
Speaker 4:So yeah, that's a great question. There is an exemption under paragraph eight of schedule one of the Housing Act 1998 for lettings to students by specified educational institutions. Now those are specified by get ready for some long regulations, the Assured and Protected Tenancies Lettings to Students, Regulations 1998. Now universities can be specified institutions and so if a tenancy is granted by a specified institution then the agreement is unlikely to be an AST and the renter's rights bill would not apply.
Speaker 1:Perfect. I think that's really really clear, and that's all we've got time for today on the renter's rights. Bill Holly, and thank you so much for joining us across these episodes. I'm sure your advice has been really really helpful to our audience, so hopefully we'll see you again soon.
Speaker 4:Thanks for having me see you again soon.
Speaker 1:Thank you to my student halls for being our headline sponsor for the season. Your support is hugely appreciated. And, of course, thank you to Utopia and Wash Station for coming on board for season four. We are grateful for your support and look forward to working with you throughout this season. We hope you've enjoyed listening to this episode. You can hear we have a lot to catch up on. Yeah, mainly Dan. I know I've missed catching up on all of the shared living news. So, as ever, if you've got any hot topics or ideas of what you want us to cover in this season from the pbfa, btr, co-living, university living hmos and university accommodation sectors, get in touch at hello at housepodcastcom. We'll see you next week.