There are multiple failure cases. It certainly could have been worse. On the other hand, it obviously could have been handled better.

I suspect the only "right" way to handle things like this is by the automated system having certain pathways that require human interaction for edge cases. That way "student X dropped out" and "student Y died" can be treated differently without needing a workaround or complaint. If the system tracking dorm allocations notes a vacancy, it can also note "but I can't handle this one" and assign appropriately.