Houses students in horrible new digs (9)
I believe the answer is:
dwellings
'houses' is the definition.
'students in horrible new digs' is the wordplay.
'students' becomes 'll'.
'in' indicates putting letters inside.
'horrible' indicates anagramming the letters.
'new'+'digs'='newdigs'
'newdigs' with letters rearranged gives 'dweings'.
'll' going into 'dweings' is 'DWELLINGS'.
(Other definitions for dwellings that I've seen before include "Residences" , "homes" , "Abodes" .)