It is sad, and I fully sympathise, the circumstances sound shockingly similar. With Nina's post and now this it saddens me that it seems to be happening to a few people.
If he's anything like me, his self esteem will have hit rock bottom. You can help him by providing support and encouragement, and remind him of his achievements, how hard he's worked to get where he is. And, like the replies to my original post, be positive. He WILL find a house.
As for chucking in the course, it all depends on his passion for the subject. I've known I've wanted to be an engineer for as long as I can remember. It's been my motivation at school, and I could never let anything like this stop me now. If I wasn't so enthusiastic about it, I might well have done.
People have described me as kind and caring, and as such I can't comprehend the lack of consideration of my feelings. From what you say, I think he'll be feeling much the same. He'll just have to use that to spur him on. Right now I'm thinking I'm better off without them, and am planning to recreate the fresher's week vibe. That is, get out on campus, go to all my clubs and societies, and talk to EVERYONE. Raise the subject of accommodation, it'll be on everyone's mind right now. I'm naturally quite shy, but I know I'll have no trouble with this motivation. Surely, it's only a matter of time before I meet someone who I gel with who is looking for a house mate. They'll be lucky to have met me, and my 'friends' no longer deserve me. Grarrrr.
Crikey, I'm giving advice so soon after my initial plea for help. I hope for the sake of both of us that it's sound.