Max student loan is for people to pay for accommodation from too though! £500 per month on top of paying for accommodation, so all as spending money, is a hell of a lot, lots of people working full time don't have that after paying for housing and bills.
I went to uni 10 years ago, and didn't know anyone who got £500 a month from parents. I worked part time whilst doing a pretty full on course, and probably lived on about £500 most months, including to pay for my accommodation and bills!
A few had parents pay for accommodation and they had their student loan (usually not much beyond the minimum of £3.6k a year, so £1.2k a term, £300-400 a month), to live on.
Otherwise people got nothing and got part time jobs (some thought our uni, some working ad-hoc in our SU or in student support and student services, and some in the local town), or got £200 a month or less (which is still about £50 a week - which was pretty adequate for food, a cheap night out and some extra curriculars).
If you've got £500 a month spare, then by all means send it to him, but I'd suggest;
a) He needs to find much cheaper accommodation (you're on to spend about £100,000 over 4 years if you're paying £17k for accommodation and giving £500 a month. If you've got another child to do this for too, that's the neck end of £200,000 for both of them!) I'd say you need to be fair amongst you two kids too, so if you allow £17k accommodation for the first, you'll need to allow a similar for the second!
This is more than most people spend on a mortgage, and you can definitely get decent and even nice accommodation for much cheaper - even just by dropping down to an en-suite room in a similar block. He'll also find that the people who live in the most expensive accommodation have a much higher level of disposable income, and that's where he's actually most likely to be priced out of things, whereas living in mid-range accommodation will mean he's more likely to be living with people in similar financial situations, who'll be doing things within his budget and be on similar footing. There's also more likelihood that he'll be living with foreign students who don't like a typical student lifestyle if he's in a new purpose built block, in a studio, which may be less social that you're all imagining.
b) You'd be better off doing a big food shop for him, giving him some starting money (for books, society membership, annual travel pass, and to put aside to pay for trips), and then giving him a lower amount monthly and putting the rest of the money aside as savings for when he leaves uni (I'd say £300 a month would be adequate if you're paying for accommodation separately, leaving £200 a month to put into other savings). - You can then evaluate his budget with him over the Xmas break, and he can explain why he thinks he needs more money if he feels that way, and then you can make a decision on whether to increase his budget.