The Future of Home According to Gen Z - Affordability Webinar
As The Property Marketing Strategists move through a series of research pillars, our latest webinar - focused on the pillar of affordability - reviews data collected from our Living and Learning survey.
Gen Z is already disrupting worldwide views and movements. As they move into the student population and working world, we can expect to see great change influenced by their values, beliefs and expectations.
As a part of our wider research initiatives, the affordability segment is perhaps one of the most pertinent. Tying closely with each pillar of our research focus, in the webinar, we discuss how affordability is defined through the eyes of Gen Z, as well as how it impacts quality of life, their experience of student living, and their overall decision-making process.
As a nation, we are all feeling the shockwaves of the economic crisis, so this topic is applicable not just for the PBSA sector, but for universities across the country.
In this webinar, we discuss the topic at greater depth while opening the floor to input from our impressive panel consisting of:
Rommel Faytaren, Director of commercial services for Optivo, Amit Singh, founder of Uniacco, Victoria Tolmie-Loverseed, Assistant Chief Executive at the National Student Housing Charity, Matthew Morgan, Director of the Quality of Life Foundation Charity, and Jon Wakeford, Director of Engagement at UPP.
Affordability and the home
To open the discussion, Sarah from The Property Marketing Strategists put forward the question: ‘What does affordability mean in relation to homes, particularly from a professional point of view?’
Rommel began the dialogue with reference to the importance of affordability in defining their overall business agenda: “Affordability is central to our business. Our role is to provide accommodation to people whose needs are not met by the market. So often we charge up to 80% of the market rent, and broadly speaking about affordability, outside of where there are subsidised options, it’s a question of income to debt ratio. The challenge is can they afford it? And there is a question of the limitation of the options.”
Jon Wakeford went onto talk about occupancy levels in relation to affordability: “Ultimately, occupancy is the key driver. So we have to keep rents reasonable. It's about having a spread sales mix, and ensuring that there's an offer there that represents value for money for any budget.”
Jon explained that they maintain a 99-100% occupancy level, so affordability is key. Victoria concurred with this point and spoke about the importance of diversity of prices within the market. Choice and availability at the middle and lower ends of the market are crucial to maintaining availability and choice across clientele.
Of course, there is also the relationship between affordability and quality of life to consider.
Matthew Morgan: “If you've got control of your finances, then you're going to have a more secure and happier time in your student life.”
Offering a more diverse package that considers different points of the market increases availability and accessibility for more people.
Victoria Tolmie-Loverseed: “There is focus on developing high spec products, but we have to maintain availability at the middle and lower ends of income constraints too, that’s most important.”
Student perceptions
Do future students have a different perception of affordability? It seems so. Sarah reminded the panel of some interesting data, when asked if they thought £165 average a week outside of London, and £259 a week inside of London, was a fair price to pay for student accommodation, including bills. Surprisingly future students were more likely to say yes. Is this because they are simply more realistic?
Victoria thinks there is more to it, pointing out that perhaps their expectations are shielded by living at home. Jon attested to this, speculating that for future students, it’s a hypothetical scenario, as opposed to being a current student having to take extra jobs to pay the rent (48% of students work a part time job to make ends meet, according to our research). You can’t really understand the concept of affordability until you’re in it and living it, which could explain the results.
Graduates have lived through it and are perhaps the most realistic, but as mentioned, the cost of living crisis is likely to impact the coming years in ways we’ve not seen yet, so this varied response was to be expected.
International students
Sarah asked Amit about the perception of Indian students on what's happening in the UK. Most operators have chosen not to increase their prices in the hope of focusing on a more long term view, but people are still concerned about the general cost of higher education. “Currency and inflation both impact the accessibility of higher education to international students. Private accommodation is becoming cheaper and more accessible for international students to reach the UK.”
International students also face the problem of availability. Most accommodation blocks are booked up by April/May, which is before many international students even receive their confirmation letter. Therefore, there is the inhibition to book the accommodation early, and availability becomes an even bigger challenge than affordability. This links back to Victoria’s point about the diversity of your offering. Perhaps that comes down to more than price.
However, Amit built on this point talking about the value proposition offered by PBSA units. In terms of their perception, “the affordability is going for cheaper private accommodation, where actually the all encompassing all fee included PBSA accommodation, which is priced at the right price point is actually coming across as a better value proposition for them. So a lot of effort has gone in from the team this year to explain this.”
Amit: “Of 200,000 students who visited our website, we couldn’t provide accommodation for 50% of them because of cost and affordability so it’s clearly something we need to solve, too many students are not able to find accommodation for the price point they have.”
PACKAGEs
We then spoke about packages, and what students are willing to pay for. Our research revealed amenities such as cinema rooms and video production studios aren't as popular as convenience enablers such as launderettes and high speed fibre optic. Amit built on this point, touching back on his mention of PBSA often being viewed as the more expensive option by international students, but that there was significant value in the sense of community that PBSA is conducive to.
Matthew: “I think that having a bit of space for study, chaired study, small shared gatherings where people can get together and do their own things, I don't think they particularly need lots of facilities to enable that, just a bit of space and some sofas. And that's actually really valuable in allowing people to connect and build communities and get to know one another.”
All-inclusive packages have long been favoured by the student population, but are these feasible in the midst of a cost of living crisis? Some operators have experimented with new ways of doing things in order to control energy consumption and resources.
Jon recalled how an operator in Birmingham tried to break out utility costs from their package and were met with protesting and rent strikes. Which is understandable. Students value the control and security of knowing how much they’ll pay and when. However, there is an opportunity to try and control it at the point of use.
The panel spoke about live metering and nudge economics as tactics to incentivise more efficient energy consumption. This can pre-empt behaviours such as healthy competition between flatmates, such as who can use the least.
Victoria: “In all our buildings we have metres, and we used to charge an energy supplement. If they used more energy we would bill them, if they used less we would refund. This wasn't particularly popular, as they didn’t like the uncertainty and were worried about a big bill at the end of the month.”
Live metering however still allows operators to give usage information, incentivise good behaviour and encourage fair usage.
This plays into the element of control that is so valued by those trying to limit their finances and maintain financial stability. When you are sharing a flat you can’t have control over flatmate's usage and overall energy consumption but it is key that people have that sense of influence and maintain control over their finances.
Diversity of product
So, is there a place for diversity of product in the coming years?
“I think we're facing a really difficult few years because we have a combination of things going on in the market, which is going to make the development of any student accommodation incredibly difficult.” said Jon.
Matthew suggested that while there are opportunities within the market to try more luxury products that increase rent prices, there is also an opportunity to be more focused on lower rent and take some of the facilities out that aren’t as valued, focusing on study spaces and convenience amenities instead.
“For people at the moment, there needs to be more targeted financial support for students who came from means tested families, and even for some kind of middle families where perhaps they've got two kids at university at the same time, and just the real cost of that.” This highlights a great point in that we need to understand the cost implications for families and the bigger picture, not just the students.
The panel spoke about how students are becoming worried about the pressure that was being put on their parents to fund them, in turn impacting their mental health. 85% of our Youth Forum told us they haven't spoken to anyone about their financial terms, despite 68% of them struggling to get by financially. And 48% taking on part time jobs to make ends meet.
The role of technology
Could technology relieve some of the inevitable cost increases in the future? For example, Sarah suggested the concept of technology in place of staff. Apps and systems that support the booking process and automate processes for ease of use may be embraced by younger generations.
There was a discussion around what technology is used for since the COVID pandemic and how this perpetuated the adoption of technology for things such as booking, digital check-in, access to legislation such as fire safety inspection etc. Amit spoke about how international students have embraced the virtual tour element which is reducing costs and making the process easier for international students. More technology is likely to be embraced by Gen Z, but only where it is purpose built and makes life easier. In our previous research pillar centred around technology, VA and the Metaverse were not as likely to be embraced, but if technology could ease the financial burden while making the entire booking and customer service system more efficient, it’s most certainly a route for consideration.
What this means for the future…
Affordability is, and will always be, a huge factor in the living experience of students. Impacting their mental wellbeing, decision-making, their families and their relationships with flat-mates, affordability is the crux of the student experience and impacts life in more ways than one. But the student population, like any demographic pool, is flooded with its own diversity. Some students are financially free to make decisions based on their preferences, while others are restricted by financial limitations. Diversity of product is therefore essential in catering to all cross sections of the market.
What is clear is that students are not looking for luxury add-ons and are not willing to pay for these. They value security, clarity, and control when it comes to their finances, and for a significant proportion, financial support would be greatly valued.
The financial burden of university continues to put pressure on current students and international students, but for future students, they have a more optimistic outlook. This could be down to a number of factors, but until they live the experience themselves, are they equipped to make this judgement? Only time will tell. For now, operators must take on the onus of preparing for a challenging few years as the cost of living crisis continues to grip the nation, by looking for suitable ways to minimise the financial burden on students and their families. Controlled energy consumption, analysing behaviours, evaluating value propositions, offering more diversity of product across markets and embracing technology are just some ways to achieve this moving forward.
Watch the full webinar here