Student Accommodation Outlook: Institutional resilience is as important as student demand

Mind the (visa) gap

Home Office data shows the number of main visa applicants under the sponsored study route fell to 71,600 in September, down from 79,800 last year, a fall of 8,200 applicants, and the lowest total for that month for five years. That drop follows an even sharper decline in visa applications in August – the busiest month for visa applications – when only 99,500 students applied, down from 120,300 in August 2025 and 147,200 in August 2023.

In the year to September, 303,200 sponsored study visa main applications were processed, down 20% on the year previous and -15% on the comparable period in 2024. The latest figures come amid growing concerns over rising visa refusal rates across several key overseas markets, including Pakistan, Nigeria and India. This has raised concerns about university compliance. Since June 2026, a university risks losing its licence to sponsor international students if it repeatedly records a visa refusal rate above 5%, down from the previous 10% threshold. The falls are steep in some markets. Pakistani student visa grants fell to 19,600 in the year to June 2026, down from 37,000 in the previous 12 months, a decline of nearly half.

Financing the gap

The Office for Students’ (OfS) financial sustainability report 2026 found 36% of English institutions reported deficits last year, a marginal improvement on the 43% figure predicted by the watchdog in its last annual report. Despite the improvement, the OfS expects more than four in ten universities to post deficits next year.

The average tuition fee for an overseas undergraduate studying at the country’s leading universities is expected to increase to almost £34,700 by 2028-29, up 29% from 2024-25, according to analysis by the OfS. While domestic students pay a fixed fee, the cost of tuition for those coming from abroad varies between subjects and institutions.

The data underlines the sector’s growing reliance on overseas students to compensate for a domestic funding shortfall brought about by years of frozen tuition fees for UK students. British undergraduates starting this autumn will pay up to £9,790 a year, just £790 higher than in 2012, although fees do now rise in line with inflation after the Labour government recently ended years of freezes.

Who pays for the future?

The OfS has repeatedly warned against “persistent over-optimism” about student recruitment after years of volatility that have contributed to a financial crisis in the sector, which gets a fifth of its income from international fees. Providers have projected an increase in total income of £8.4 billion between 2024-25 and 2028-29. Nearly £7 billion of this increase is from course fees and education contracts, with more than 50% of the anticipated increase from overseas tuition fees.

To test the resilience of universities’ assumptions, OfS modelled three plausible scenarios, the most severe (Scenario #3) would see cumulative losses of £4.2 billion pushing almost 200 providers into deficit by 2028/29, representing 70% of the sector.

Under the ‘no growth’ scenario (#1) assuming flat student recruitment going forward, nearly 60% of England’s universities are forecast to be in deficit in five years. An annual international levy of £925 per student, which will take effect in August 2028, is expected to increase the financial strain on universities.

The impact analysis forecasts conducted by the Department of Education stated that student enrolments will decline by 14,000 in the first year, costing the sector circa £270 million.

Reinvention of UK higher education

UK higher education is restructuring, and mergers are becoming a mainstream response to fiscal pressure. Notable examples include The University of Greenwich and the University of Kent completing their merger in August 2026, while the new London and South East University Group (LASE) is described as the UK’s first “super-university”, and its group structure is designed so that other universities can join later.

The UK should pay close attention to the US, where consolidation is already well advanced. Since March 2020, just shy of 50 US colleges have closed or announced closures and at least 40 have merged, affecting an estimated 53,440 students, according to ACE (American Council of Education). Closures have been concentrated in the Northeast and Midwest, where demographics are weaker. While McKinsey found that higher education M&A in the US has roughly tripled over the last decade.

For UK PBSA investors, the lesson is that university covenant strength now matters as much as the city an asset is in. Demand is likely to become increasingly concentrated around financially resilient institutions. Assets that rely on a single fiscally weak university, or on a campus that could be rationalised, face rising occupancy and nomination risk.

Talent where it's trained

Andy Burnham’s premiership has made universities part of the government’s growth strategy. Before taking office, he pledged to put them "at the heart of local economies" and to make the UK the world’s leading "innovation nation".

Devolution has since become the defining theme of his government, and universities are expected to develop graduate talent and keep it where it can raise local productivity. The agenda isn’t entirely positive for the sector, though. Burnham has pledged to end a school system “configured entirely around the university route" and to give technical education equal status with academic study.

International students remain central to this agenda, and how they are counted is just as important. Net migration fell to an estimated 171,000 in 2025. Even so, students and their dependants made up 47% of non-EU arrivals, which keeps them firmly in the political spotlight.

The Office for Budget Responsibility (OBR) is changing how it forecasts migration, but not the definition it uses. It still follows the ONS rule that anyone staying more than 12 months is a long-term migrant, so students continue to count. Pressure for a more detailed approach is building - the Institute for Fiscal Studies (IFS) argues that forecasts should reflect the mix of migrants, because people on different visa routes have different effects on tax receipts and public spending. For universities, and for the PBSA demand that depends on them, a model that treats students as temporary residents rather than permanent arrivals would ease the political pressure on international recruitment.