Professor Glen O’Hara’s article in today’s Guardian on the threats to the UK’s universities is food for thought; and it strikes me that there are wider and very significant implications for the built environments and economies of towns and cities like Portsmouth, where I live. Social distancing guidelines have resulted in universities moving to online teaching only, from September 2020 onwards; however they are still asking students for full tuition fees of up to £9,250 per annum. (Living costs are extra.) Students and prospective students are increasingly looking at deferring their places, as they stare not only at a bewildering future of debt and unemployment, but also a disintegration of meaningful “student experience”, student support and value-for-money. Overseas students in particular - the universities’ “cash cows” who pay inflated fees - are expected to stay away in substantial numbers.
Cities like Portsmouth, dependent on one large and rapidly-expanded university and the tourist vibe to keep its economy afloat, are looking at dark days ahead. These cities are very far from ‘open for business’. The university sector is in crisis, and when it inevitably contracts it will take a lot of other businesses down with it.
Portsmouth: all these tall buildings in the background are private student halls. The “Dirty Disco” is a student favourite - now closed (Photo: Eleanor Scott)
Which brings me to the matter of ‘Portsmouth’s Follies’ – the new, sky-scraping private halls of residence built by the private sector, in various degrees of partnerships with the university such as “nomination” arrangements, designed to accommodate the growing numbers of students and price-pointed to part them from the majority of their maintenance loans. Will these buildings become the redundant built reminders of the unsustainable business plans and debt mountains that now define the university sector, enabled by a marketisation approach, a permissive planning regime and weak investment protocols? Will they end up as ruinous ruins, stack upon stack of hutches containing small rooms with tiny shower pods (aka “en suite” accommodation), unable to be affordably re-purposed as family accommodation when the arse inevitably drops out of the private “luxury” student halls market? Are university cities like Portsmouth - normally home to over 25,000 students - really prepared for what could lie ahead?
Student borrowing and spending underpin someone else’s profit plans
The private student accommodation companies are not immune to destructive economic forces just because they have business models and shareholders. Far from it. In fact it’s these modern business models, some of them bordering on pyramid and venture capital schemes, that could well hasten the speed at which we become unstuck in cities like Portsmouth, built as they are around investment avarice - all predicated on continued university expansion, the willingness of home students to borrow and spend significant sums of money at a young age, the spending power of thousands of overseas students, the ability of their parents to “top up” their living costs, and the students’ accommodation needs.
The “model” is collapsing in front of us, in the cities around us. Unite Students - a big player in Portsmouth - has already started to cut dividend payments and is talking about luring students out of HMOs (private houses of “multiple occupation”). Its share price has fallen fairly significantly over the past six months, seen here. The pandemic is having a profound effect. Cities must prepare for the impact on their own built environments and civic finances. Local Authorities also have the “optics” to think about - how will it look to local voters to have so much empty accommodation in cities with massive shortages of affordable housing?
The student debt mountain in the UK
The pandemic and social distancing guidelines, by having such a demonstrable and massive impact on an already near-bankrupt university sector, are further highlighting the economic absurdity and dangers of the student loans system. Right now, higher education institutions, including many very highly regarded ones like Manchester University, are collectively in about £7 billion of debt and rising. They’ve asked the government for a bail out. But universities are not to be rescued like the banks were; and the best they will get is a partial hand-out that will vanish into the growing black hole. It’s pretty much looking like universities are being told, “Cut your cloth …” - and underpaid and overworked lecturers, the backbone of higher education, are sick of it. And I don’t blame them. I worked around 48 hour weeks on “0.75 FTE” as a university lecturer and while there was a certain status to it, it was crap in terms of pay and conditions.
This private student halls building was completed late and many students had to be housed in budget hotels for their first term
The student loan book – the amount of money that previous and current students now owe to the Government via its money-lenders, stands right now at around £140 billion. Student loan statistics published by the House of Commons Library reveal that by the middle of the century the government estimates it will be in the region of £450 billion. This debt is increasing rapidly due to the eye-wateringly high interest rates charged and the new annual loans given out. The interest is charged from the moment the loan is made, so by the time a student graduates they have already accrued years of interest on top of the actual loan. Ongoing interest is then charged on the total debt.
It’s looking increasingly likely that most of this will never be repaid. An optimistic estimate, pre-Covid-19, was that around a maximum of 30% would ever be recouped. Those estimates are plummeting monthly, as the appalling employment prospects for a generation of recent and future graduates become clearer. How the Government eventually squares this with the taxpayer is yet even to be imagined, let alone negotiated.
The planning system allowed these private ventures - why?
Some years ago, at the start of the rapid expansion phase of the universities, it became apparent that there was a shortage of student accommodation in towns and cities like Portsmouth and Wolverhampton. The universities, government and local authorities declined to invest sufficiently in this need, leaving “the market” to fill the gap.
Wingfield House, Portsmouth, former HMRC tax offices - now a building site belonging to Unite Students (Photo: Eleanor Scott)
“The market” comprises landlords with big property portfolios, companies and consortia whose main driver has been to part students from as much of their maintenance loans as possible, pitching rooms in Halls at price-points that did precisely that. (See previous blog piece.) Now, they’re struggling to retain cash flow and stay afloat.
The building of these towering private Halls was done with the approval of city councils. Local planning authorities such as Portsmouth City Council gave planning permission after due consideration for the construction of a number of new students blocks, as well as for the re-purposing of former employment space as student blocks (with annexes), such as the former Zurich House and the Wingfield House tax offices. The new blocks comprised both rooms and “luxury” apartments.
Many of these landlords and companies involved in Portsmouth looked to the East for customers – some specifically specialise in marketing their ‘offer’ to students in China, Hong Kong, and Malaysia, and have multiple offices there.
A number of local residents have voiced their disquiet at the scale of the building work. The argument I’ve heard time and again from members of the Planning Committee and other councillors is that it’s much better for students to be housed in purpose-built student blocks in the city centre, close to the university, than to be housed in rented houses and HMOs in the residential areas of Southsea and Fratton, bothering Portsmouth’s long-suffering residents with loud drunken parties and late-night nuisance.
As someone who has lived next to noisy students, I can sympathise with this argument - but it’s far too simplistic. I’ve also lived next door to lovely students who simply could not afford the £167+ a week for private halls, for a perhaps ten or eleven month lease . I’ve seen student rooms in in shared houses, on the other hand, advertised for as little as £50 per week (£75 including bills), over a nine-month lease.
It’s also a rite of passage for a significant number of students to experience the freedom and independence of living in a shared house or flat, rather than being hemmed into a cramped 6-bed-roomed flat in the expensive sky-hutches with their rules, regulations, restrictions and additional charges. With social distancing and no Freshers’ Week, and possibly no Student Union and only online teaching, it offers a fairly bleak experience.
So can private student accommodation providers survive a bad year?
Private student halls companies have already taken a hit in not charging many students for this current summer term, owing to “lockdown” and what was effectively the closure of universities. As noted above, Unite Students responded to this by taking the decision to cut dividend payments to shareholders, and to focus their marketing at students who would otherwise sign up for HMOs - but the company will have to drop its prices to succeed there.
In other words, private student halls companies are banking on being able to survive a year with much reduced income, hoping that 2021-22 will be a boom year for applications to universities when those who deferred come back into the system alongside the new intake. That’s quite a gamble.
There may not be a “boom” of any kind. As unemployment rises, and this year’s graduates struggle to find any kind of graduate employment, the shine is going to be wiped off the idea of going to university for many young people and their families, possibly for years.
Students who do accept a place at university may well choose to live in cheaper shared houses; or to live at home and study at their local university; or to live at home while they study online. Another problem for the profitability of private Halls is that bonus income has been derived from charging extra for facilities such as (expensive) on-site launderettes, and from vending machines and coffee bars. If these are all closed or restricted due to social distancing restrictions, as well as the Halls being under-occupied, it will impact further on the financial viability of the student accommodation companies.
By the time that any kind of economic normality returns, a number of universities will have gone to the wall, or they might be in the midst of mass redundancies of their lecturers. Who wants to accrue £60k worth of debt to be given a by-the-numbers, flat educational experience taught by (exploited) hourly-paid lecturers, probably coupled with limited lab and fieldwork learning opportunities, instead of having a top-class education enriched by the pedagogy, seminars and tutorials of cutting edge research-active academics? Everyone may as well stay online.
And we still have a (probably hard) Brexit to get through, to which can be added the known demographic contraction of the number of 18 year olds in the population.
Those expensive student sky-hutches could well end up standing empty.
