Most universities have limited capital. For others, investing in accommodation faces competition from teaching and research Competition for capital at universities Much has been written about the UK Higher Education sector’s financial challenges. Faced with frozen home tuition fees, universities have increasingly chased recruitment of international students, some with more success than others, and some are better placed to maintain recruitment in the face of a slowdown in this market. The majority of universities have limited capital, and even those who are better placed – with larger reserves, and limited borrowing – face the same constraint: investment in accommodation, no matter how pressing, often ends up as a lower priority than investment in their core business of teaching and research. Funding and capital options In this situation, where accommodation is the only one of these to have its own separate funding stream through rents, universities have tended to focus their own capital on teaching and research, and to seek alternative funding for accommodation projects. We review these in more detail in Section 5, but broadly, these sources have tended to be bond finance, income strip funding, and private real estate investment, which then split into other options depending on how they are structured, whether a third party investor or developer is involved (e.g. with a JV), and how the risk is split with them or the university. Universities’ financial performance metrics for their residential estates These vary greatly, and are often sub-optimal or even non-existent. They are a world away from the more systematised approaches that professional PBSA operators employ. This is partly because of the way the different costs associated with the residential estate are often scattered across a number of university departments, and so the seemingly simple question of ‘what are your residential operating costs?’ often becomes very hard to answer accurately. In turn this is often because financial performance is measured with a different set of criteria in mind than one finds in the private sector. Universities are often more concerned with balancing the twin priorities of keeping rents affordable and not losing money; they are not preoccupied with measuring return on investment as the private sector is. A Student First Group research report | April 2026 | Page 33