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Student accommodation in times of rising fees and shrinking disposable income

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A partnership with the Gauteng Partnership Fund (GPF) has provided Futuregrowth with further opportunities to invest in the student housing market, where the demand for student beds far outweighs the supply of good quality, safe accommodation in a conducive learning environment.

Futuregrowth has committed R250 million of senior debt which will be used to fund developments alongside the GPF’s junior debt and the property developer’s own equity investment into these developments.

Established by the Gauteng Department of Human Settlements in 2002, the GPF remains committed to its vision to be “the partner of choice in affordable housing delivery in Gauteng”. Partnerships between the GPF and funding providers in both the public and private sector assist the GPF in meeting its objective of rolling out good quality affordable housing and student accommodation developments across Gauteng. Futuregrowth’s partnership with the GPF is one of the many successful instances of the public and private sector coming together and working diligently towards achieving a common goal on commercial terms. And the investments made by Futuregrowth are always underpinned by our fiduciary duty to our clients, to generate risk-adjusted commercial returns on the funds invested.

The spate of student protest action witnessed in recent years has brought to the fore the plight of many students, particularly those coming from disadvantaged backgrounds. The problematic administration and abuse of financial aid schemes over the years has led to many deserving students not being able to access this sources of funding.

Further along the income spectrum we find the so called “missing middle”; the students from lower to middle class families who “are deemed too rich to qualify for government support, but too poor to afford tuition fees”[1].

The financial pressure facing these families means that their household disposable income is not sufficient to service payments on the student loans offered by the traditional financial institutions. The key take away from this is that affordability is a major hurdle to many families’ ability to send their children, our future leaders, to study at our country’s many tertiary institutions. And when academic tuition fees alone are an issue, the burden of accommodation costs becomes insurmountable for many families countrywide.

In 2011, the Department of Higher Education and Training (DHET) conducted a study which revealed the severity of the shortage in on- and off-campus student accommodation at South Africa’s public tertiary institutions.

These are a few of the findings highlighted by the DHET from the 2011 review[2]:

  • there was a shortage of 200 000 beds at the 23 campuses across South Africa which were included in the study, estimated to be 220 000 by 2016;
  • 107 000 student beds were being provided, which translates to 6 or more applicants per bed;
    only 5% of 1st year students were accommodated at on-campus university residences;
  • 40% of the students who receive financial aid from NSFAS (the National Student Financial Aid Scheme) fail 1st year;
  • of the 710 000 students enrolled at the 264 TVET (Technical Vocational Education and Training) colleges, there are only 10 120 beds to accommodate them on-campus (i.e. approx. 1 in 70 students are accommodated); and
  • the DHET identified inadequate budget, inadequate bulk infrastructure and poor maintenance of existing infrastructure as the main reason behind the shortage which is still escalating.

These findings further highlight the need for private and public sector collaboration in the provision of good quality, safe and affordable student accommodation developments which are also commercially viable for financial institutions like Futuregrowth to invest funds on behalf of our clients in order to earn adequate returns. And the GPF and Futuregrowth joint-funding arrangement is a prime example of the private and public sector working together to fund developments in the affordable housing and student accommodation market.

One of our many successful student housing collaborations is a development called Varsity Lofts situated in Vanderbijlpark in southern Gauteng developed by Lavigen Lofts, an experienced property developer. The established town of Vanderbijlpark is home to a number of higher education institutions, including campuses of the North-West University (NWU) and Vaal University of Technology (VUT).

This new development will accommodate 119 students in a combination of single and double occupancy rooms within a 5km distance from both NWU and VUT. Bedworth Park, the residential suburb in which Varsity Lofts[3] is situated, has a mixture of well-maintained, refurbished and vacant properties, and has amenities and public services within close proximity. Students who, in desperation, may have had to take up accommodation in unsuitable and/or unsafe conditions are now being offered the opportunity to stay close to campus in a secure residence that fosters learning. By pooling skills and resources, Futuregrowth and the GPF have the opportunity to deliver accommodation that supports the academic progress of students who have limited financial means. 

Nelson Mandela famously said “Education is the most powerful weapon, which you can use to change the world”. We must therefore ensure that our future leaders have the option of safe, good quality and affordable accommodation while they are receiving this highly sought-after and valuable commodity. 


[1] Are you part of the missing middle? published on 25-07-2016 at https://www.news24.com/PartnerContent/are-you-part-of-the-missing-middle-20160715
[2] Report on the Ministerial Committee for the Review of Student Housing at South African Universities published in September 2011 at http://www.dhet.gov.za/Financial%20and%20Physical%20Planning/Ministerial%20committee%20on%20provision%20of%20student%20housing%20(2).pdf
[3] Varsity Lofts website https://www.varsitylofts.co.za/

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