Is sector expansion harming social mobility?

Many of the rumours surrounding the Augar review concern different methods for controlling student numbers.

It would be fair to say that the sector consensus has been that social mobility would be harmed if the rumours came to pass. Indeed, the Russell Group urged Ministers “to explicitly rule out any de facto cap on student numbers, which would hurt poorer students most” – and on the surface, they’re right.

The complete removal of student number controls, and the onset of accelerated competition for applicants is in itself interesting – both because of what we focus on and what we don’t. The impact on individuals’ chances of getting into higher education – particularly highly selective education – is naturally much debated. The impact on the nation’s finances is now well understood, thanks to pressure on the Office for National Statistics. And the impact on institutional finances is now rarely out of the news, with the clear sense that cut-throat competition, coupled with a demographic dip, has pushed “weaker” institutions into trouble.

What are we missing?

But are there are other impacts – on students, and communities – that we might be missing? Economist Paul Ormerod, writing in City AM, is for example pretty positive about it all:

From the students’ perspectives, the reforms have been unequivocally advantageous. Many more get to go to more prestigious institutions than they would have done when rationing was in force”.

This was, of course, the argument propagated by Willetts et al. for the removal of number controls in the early part of the decade. But while headline student satisfaction might have held up, a glance at NSS results for the top twenty expanders over the period shows a worrying decline in “organisation and management” scores. There are plenty of tales from students’ unions about overcrowded lectures, overrun counselling services, and students having nowhere to sit.

And in the contracting providers, there’s now restructures, and redundancies popping up across the sector – with student protection plans nowhere near fit for purpose enough to catch the rationalisation that is being frantically delivered just below the surface.

And we really should get around to working out how much more student debt is now being spent on marketing and recruitment rather than teaching and learning.

Civic duties

Then there’s the impact on towns and cities. At Wonkhe we voraciously consume the news media, scouring for any mention of higher education or universities – but though we report on most of what we find, we tend to omit from our Daily bulletins the endless stories in what’s left of local news media about student accommodation. To be honest, it’s really hard to find a positive local story about studentification, and even harder in the comments below a story.

And no wonder. In the Civic University Commission, focus groups found the “crowding, nightlife, and restriction on local housing that universities generate” to be major frustrations. The Guardian last year summarised the National Homes of Multiple Occupancy (HMO) lobby’s views like this:

A proliferation of HMOs, which are popular with young professionals, as well as students, skews property prices, which become based on rental income. House extensions and conversions proliferate, often illegally, to squeeze in more bodies. Local authorities cannot afford to employ enough planning inspectors to keep check. Two-bedroom semis become five- and six-bed HMOs. Rubbish piles up, doctors’ surgeries become oversubscribed and shops close when areas become ghost towns out of term time.

And then there’s “destudentification”, when an over-supply of accommodation from new purpose-built blocks – or a rapid decline in student numbers – means students move on, leaving swathes of houses empty. There are plenty of places like Plymouth where the city centre was full of bets on retail and students a decade ago – but are now having debates about whether to house the homeless in “ghost blocks” of empty student accommodation.

While the town suffers, the gown is just as miserable. NUS points out that average rent has gone from 55% of the maximum available loan in 2013 to 73% in 2018. The other popular mention of the sector that we don’t tend to report on is the specialist property press, endlessly salivating at the “up to 15% yields” available from student property.

And it’s not as if the quality has improved either – NUS says that 42% of private student renters live with damp and mould, one in five share their homes with mice, rats, slugs or other pests, and 16 per cent report electrical hazards. This has a real educational impact: over a third report that the state of the rented property left them feeling anxious or depressed, and 17 per cent said that it had exacerbated an existing health condition. One of the causes of that mental health crisis might have been under our noses all along.

Back when higher education expansion was gentle and controlled, maybe the local housing market was able to expand in sensible ways all on its own – without undue shock to the locals or rent getting out of control. Perhaps the overwhelmingly middle-class student intake was able to call on parental support for legal advice when a landlord was exploitative. In those days the big concern for universities (and local planners) was capacity on campus to house first-year undergraduates. Off-campus tended to take care of itself.

Mapping the issue

The problem over the past few years is that in some locations, expansion has been anything but gentle and controlled.

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We’ve used postcode areas (the first one or two letters at the front of your postcode) to look at regional rather than institutional impacts. Clicking on one of the blobs on the map lets you look at the growth or decline in three types of student accommodation between 2012 and 2017 – private halls, provider halls, and other rented accommodation (usually multiple occupancy buy to let). The size of the blobs on the map relates to the overall growth student numbers in these three forms of accommodation between 2012 and 2017. All student data is from HESA. For England and Wales, the colour relates to average house prices in December 2018, using data from the Land Registry.

The Coventry area looks to be the place outside London that has seen the greatest growth in student accommodation over the six years in question – with two rapidly growing institutions driving an expansion in the private rented sector. However, Warwick’s expansion has been supported by a growth in buy-to-let rentals, Coventry’s by provider-owned halls.

The WC is an outlier in many ways – loads of institutions, loads of students, and an arguably ridiculous average house price. Growth here, perhaps driven by the value of property, is primarily in provider-owned halls and private rentals.

When we first started this project, we expected to see private halls changing the landscape. This isn’t as much of a trend, though you can see it in Liverpool, Bristol, and Newcastle.

What’s probably more of interest is each town or city’s local story or context. Even just looking at the growth in HMO population suggests a very high number of students being added to a particular local area in some bits of the country. Even where purpose-built accommodation has been soaking up the expansion, there’s pressure on local services and infrastructure. In many cases, it’s hard to believe that local authorities meaningfully predicted and prepared for what was to come in 2012.

Won’t someone think of the students

So the pertinent policy question is who should take responsibility for all of this? For many years, every higher education minister that has visited a campus has heard complaints from students about costs generally, and rent specifically. But it’s almost impossible to find a moment when they’ve commented on it, let alone suggested that there might be a policy solution in the offing. A promise at Wonkfest18 that DfE were looking at this came to nothing, and we even once asked Sam Gyimah about the tiny step of collecting proper data on accommodation costs – to which he declared that it wasn’t an issue for government.

DfE tends to view this as a Housing, Communities & Local Government problem – yet over there, students are merely a subset of a much bigger issue where the moral questions associated with the funnelling of student loans into baby boomer property nest eggs are dwarfed by the problem of doing the same via housing benefit. And while OfS has so far been quiet on student housing (other than the student panel, of course), it’s surely an access and participation issue if students can’t afford to live either on or off campus.

More broadly, if unrestricted expansion and contraction is going to continue, the sector can’t have it both ways in arguing for the right to recruit as many students as it can without taking responsibility for the impact that this has locally, and the quality and price of housing inhabited by the students it recruits. If it’s rapidly growing demand that leads to poor housing standards, spiralling rent and over-capacity regulation – as Arthi Nachiappan pointed out – shouldn’t universities step in and either help regulate or build? Or maybe they shouldn’t expand at all.  Perhaps, as suggested on the site in September, universities should only be allowed to offer a place to a student if they can guarantee that there is somewhere affordable to live. And if Augar looks at maintenance seriously, is it wise to only look at topping up loans on the demand side, instead of controls at the supply side?

The other angle

There’s another angle to the rent story that takes us full circle on the social mobility issue. Net wealth in the UK has more than tripled since 1995, and just over £5 trillion of that £7 trillion total is accounted for by the increase in the value of housing. Every quarter, baby boomers convert just under £1bn of housing wealth into cash using equity release – using it to buy cars, holidays, or… more property.

As economists like Paul Ormerod should know all too well, when the value of houses goes up, the total productive capacity of the economy is unchanged – because nothing new has been produced. So the wealth accumulation associated with house price increases is a kind of generational theft – it’s wealth gained at the expense of future generations, who pay higher rents and larger mortgage payments. In the case of student rent, that’s paid for via personal debt – a double whammy.

Meanwhile, every day we read more stories about the “investment opportunity” that student accommodation represents, offering eye-catchingly attractive yields. “Student accommodation has provided the best returns in housing for 15 years”, says the boss of a property development firm, where “growth in the student sector has also been achieved without mass public subsidy”. Part of the problem with the current student finance system is that the public subsidy built into student loans is hidden from students and the public, but it looks like it’s lost on housing developers too.

Perhaps student finance is actually, in part, a huge transfer into the wealth of property ownership. One day some of that wealth may well get passed on to the young through inheritance. But there remains a pernicious combination of an intergenerational and class divide – between those who own property and those who don’t.

The overall expansion of the sector is a good thing. A better-educated population – especially when that education spreads more fairly throughout its demographics – is something we should all support. But we should be careful. It would be ironic if the rapid, unrestricted expansion of higher education – the very thing that we tell ourselves will help close the social divide – is only serving to make that divide worse.

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