Student accommodation driving development

In Johannesburg, Port Elizabeth and Durban, a shortage of student accommodation at universities and tertiary institutions has led to some universities outsourcing their accommodation to private developers and building managers.

“Many universities no longer have enough space on their campuses to build new residences nor the funds to provide additional accommodation for increasing numbers of students,” says Richard Rubin, CEO of Aengus Property Holdings.  “The private sector is in an ideal position to step into the breach.”

With university budgets facing major constraints and cut-backs from national government, many have prioritised academic and teaching facilities ahead of upgrading or building new university residences.

“New university residences can cost many times more for universities than engaging with private developers formally or informally,” says Rubin.

Government has set up a ministerial committee to review the provision of student housing, with the Department of Higher Education stating that all universities are experiencing severe pressures on their student housing resources.  Out of a student population of 530 000, there is currently only enough student accommodation for 100 000 students, meeting just 18% of the demand.

The department says that different factors have influenced the supply of new student accommodation or the upgrading and maintaining of existing accommodation.  Although a larger portion of the infrastructure funding provided by the department has been earmarked for student accommodation in recent years, rising maintenance and ownership costs related to aging residences, combined with the poor collection of student revenue by some universities, have limited supply of new student accommodation.

The department says the lack of supply of student housing is the primary cause for poor performance and high dropout rates at some universities, with students forced to live in conditions not conducive to studying.  This in turn has a detrimental impact on the throughput rate of universities.

Accommodation costs are also pushing university out of the reach of many disadvantaged students as rent eats up a major proportion of their monthly budgets.

“Studying away from home is simply not an option for many students with limited funds because they can’t access safe, secure and affordable accommodation,” says Rubin.  “Many opt to stay in poorer areas or informal settlements and travel long distances to lectures each day instead, impacting their academic performance.”

Most students’ loans don’t cover day-to-day expenses such as accommodation.  Some students resort to taking out personal loans at higher interest rates in order to cover the costs of renting living spaces closer to campus, leaving them with a large amount of debt when they graduate.

But a series of agreements between Aengus and various tertiary institutions nationally, offer students an alternative.  After piloting their successful student accommodation model in Johannesburg with 10 buildings, the property development and management company has purchased and converted 11 additional buildings in Johannesburg, Durban and Port Elizabeth into high quality student apartments.

Aengus has already concluded a number of transactions spanning Johannesburg, KwaZulu Natal and the Eastern Cape.

“For the past four years Aengus has been focusing squarely on its Gauteng portfolio,” says Rubin.  “However, we are now pleased with our move to some of the coastal areas in South Africa and look forward to introducing our brand to both the conventional affordable housing market as well as the increasing of number of students looking for a safe and secure off campus residence.”

“Today’s students are more discerning than in the past and while they want the collegiate university experience, they’re demanding all the modern conveniences they’ve become accustomed to,” he says. “Universities meanwhile want to be able to offer their students safe, affordable accommodation close to university campuses.”

If universities can partner with private developers to provide more accommodation options, students will ultimately benefit.

The upgrading of buildings has other positive spin-offs for city centres, creating student hubs in areas which were previously degenerating.  In Johannesburg, Durban and Port Elizabeth, Aengus works with the various cities’ leadership in upgrading services in the area.  Their developments form part of official city upgrading projects.

“These student developments help to improve security, bring in new customers who support retail outlets, restaurants and coffee-shops,” adds Rubin.  “Student accommodation is breathing new life into South Africa’s city centres.”

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