How to Strangle a Student Town’s Economy—The St Andrews Housing Market

By Ryan Morrice

There are few institutions better for a small town’s economy than a centuries-old world-renowned university. Businesses can expand over time, but they can also go bust. People can migrate to a town, boosting demand for local goods and services, but they can also leave, causing a slow irreversible decline. A university, on the other hand, will never fail to bring in a fresh batch of students every year, pockets full of cash from student loans. This money will be ploughed into the local economy, into shops, cafes, restaurants, and events, supporting those enterprises continuously every year.

Alas, in St Andrews a bad housing policy by Fife Council has held the town back to the detriment of students and locals alike. The root of the issue is the houses in multiple occupation (HMO) licenses. If a property is to be occupied by three or more people not of the same family, then the landlord needs to pay a fee to obtain a HMO license for the property. Since most students live in three bed or bigger properties then the HMO can be and is used by Fife council as a cap on the number of properties students can live in.

Proponents of a cap on HMOs argue that the rise in the number of students (3500 in 1985 to over 9000 today) has pushed up rent prices for locals, making it too expensive for many of them to live in the town. Furthermore, many former council homes have been bought under the right to buy scheme and then sold to buy-to-let investors who then obtain HMO licenses for them. This has reduced the social housing stock in St Andrews, increasing the waiting list for council houses.

However ultimately HMOs have failed in preventing rising rents. Research has shown that the cap on their numbers has further inflated local house prices. This happens because they only apply to properties with three or more residents, so one and two bed properties are fine to be let out to students. Hence rent prices for one and two beds are pushed up. Moreover, many properties end up having bedrooms locked or converted to some other use so that they do not require a HMO and can be let out to students. Data on this is sparse and difficult to verify as it is only self-reported by students, but a survey of students suggested that 145 bedrooms have been lost due to this practice.

All this contributes to higher rent prices for students. Their cash is sucked away by landlords, many of whom live outwith St Andrews, instead of going to businesses in the local area. The high competition for HMO properties also reduces any incentive to invest in improving the properties. As a result a significant proportion of St Andrews’ housing stock is poor quality. Making the problem worse is Fife Council’s recent decision to raise HMO fees for the University of St Andrews by almost 1000 percent. Some of these costs will inevitably be passed onto the students, further reducing how much they spend locally.

If HMOs are not the solution to rising rents then what is? Many have looked to the university to provide more affordable accommodation to reduce pressure on the private market. To some extent they have: the university already provides around 4000 beds and is planning to build halls for almost a thousand more. However, much of the university’s accommodation is already perceived by students as being too expensive, so it is unclear as to how much the new development will reduce demand in the private sector.

A better solution is to allow for more homes to be built. Rather than attempting to artificially limit the demand for housing in St Andrews from students with HMOs it would be more productive to increase the supply of housing so that there is space for everyone. The private sector is making this happen slowly: a new development should provide hundreds of news homes on the outskirts of St Andrews. However, Fife Council could have done better by having a more active strategy to promote housebuilding when the university announced their plans to take in more students. They took a 17 year break from building council houses, even as the right to buy depleted their council housing stock. And there are more opportunities to build more homes locally: Fife Council have recommended that the former site of Madras College could be used for housing; existing areas of low-density housing could also be replaced with medium-density blocks of flats to use land more efficiently.

All this would bring benefits to Fife Council as well. More homes would mean more council tax to boost their budget. There are plenty of staff at the university and employees in other businesses who would be eager to live locally were house prices more affordable. In addition, people living locally would induce more demand for local businesses and help create more jobs. If this does not happen, however, then tens of thousands of pounds of students’ cash will continue to be squandered and not go to the local economy, preventing the town’s economy from reaching its full potential. St Andrews does not deserve that.

The opinions expressed in this article are the author’s own, and may not represent the views of The St Andrews Economist

Image taken by Daniel Peckham (CC BY-NC-SA 2.0)

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