The Augar Review and Higher Education estates

How will be the Augar Review and Brexit impact the Higher Education sector?  So runs the standard question. But perhaps now it is not the right question, because both have already had an impact. Both have created stifling auras of uncertainty, and then dragged them out for unbearable periods of time. Both have led to delays in investment, by universities and the private sector alike. Projects have stumbled, stalled, or suffered, and they have had to progress by calling on a combination of determination and faith in the long-term resilience of the sector.

There was a time when we hoped that the release of the Augar Review – the Independent panel report to the Review of Post-18 Education and Funding – would put us out of our misery and restore a sense of predictability to the sector. The fact that it has landed at a time of political chaos means that it has not restored the clarity and calm that many so keenly seek.

Thankfully, its release has ended the scare-quote drip-drip of Augarleaks, which were further fuelling this uncertainty. But Theresa May’s original political purpose for the Augar Review – a pre-emptive strike against Jeremy Corbyn’s more radical HE policies – has lost its propulsion with her departure. Even if the Conservative party cling to power, the new Prime Minister’s response may be very different from what we might have anticipated under May. And it is unlikely that any new government would choose to implement a review commissioned by predecessors, regardless of how independent the panel were.

Any predictions are, therefore, to be treated with suspicion; I will not make any. There are, however, some aspects that I do want to pick up on: aspects that (as the Review observes) the sector has been struggling with for a long time.

One issue, that has been the focus for much of our HE team’s work, is around the affordability of student housing. (My daughter, who starts university this September, has brought this subject dearer to my heart than ever before.) There are two main factors for this: the price of land – particularly an issue in cities such as London, Bristol, Manchester and Bath – and the price of construction, which has been steadily rising.

The Augar Review rightly points out the ‘widespread and significant concerns about the cost of student accommodation’ but its response is rather peculiar. It recommends that the government and the Office for Students (OfS) should work with universities to ‘ensure that students are given improved and more consistent data on the range and cost of available accommodation […] to highlight the level of surplus made and where this is directed’. In itself – yes, of course, students and parents deserve maximum transparency. But the implication in this part of the Review is that it is the universities who are culpable, by making a profit from accommodation, either directly, or in cahoots with the private sector.

There are several issues with this, the first of which being that it’s not true. The universities we have worked with consider student housing to be an essential component of their offering to students, that goes to the very heart of the student experience, and that done well, contributes to recruitment, retention, well-being, mental health, and attainment. They seek to balance affordability with the costs of running it well, by investing enough in residential life programmes and day-to-day maintenance.

The tone of the Review seems to chastise universities for retaining an old-fashioned view of student housing as a cash cow: something you need spend very little on while still watching the rent roll in. Yes, this is still the business model for some landlords of Houses in Multiple Occupation (HMOs). The ghost of Mr Balowski from The Young Ones still haunts us. But universities have become well aware that this old-fashioned view is not sustainable. The growth of higher-quality student housing has meant that students are voting with their feet, and spending a bit more on a room where the wi-fi and the plumbing works. Universities have watched their oldest stock suffer lower and lower occupancy, which even cheap-as-chips rent can’t remedy.

The second issue is that the Review is silent on the underlying issues. As well as high land and construction costs, the HE sector has been driven – by market forces, funding limits and accounting standards – to divert the bulk of its finances into its non-residential estate. This process has sped up over the last decade, as the cumulative government policies of intensifying the free-market competition within the sector have taken effect, and universities have focused their borrowing power on their academic estate and research facilities.

Into this gap, the private sector has poured, and this phenomenon has not escaped the penetrating gaze of the Review:

"The government should also provide a clearer picture of private sector involvement in student accommodation by commissioning a comprehensive financial analysis of private developers and operators of purpose-built student accommodation to understand the profits that private business and investors are making from student rents."

I am not quite sure how much clearer the picture could be. Private sector beds have quadrupled in the last decade. A comprehensive financial analysis, would, I suspect, uncover the startling revelation that private businesses and investors are making profits from student rents, even as I write. Who could have foreseen that the free-market policies implemented since 2010 would have led to such unbridled capitalism?

The problem for universities, students and parents is that the invisible hand of the market has led to very uneven offerings across England (and further afield, but England is the scope of the Review). Simply, it is harder for universities in expensive cities to provide affordable student housing. You could argue that students are paying a premium for the experience that that city gives them, but this hardly helps widening participation. Taken to its conclusion this means that London would end up as the sole preserve of wealthy international students, clutching suitcases full of Sterling devalued by the destabilising effect of Brexit uncertainty. Elsewhere, we have seen the rents level out in cities with more mature student housing markets, such as Leicester and Leeds, such that there is minimal difference between those of universities and the private sector.

All this means that while the Review rightly flags the issue of affordability, it is unclear what levers OfS will be able to use to influence it.

The other major area of uncertainty surrounding the Augar Review has been what it might say about student number controls. The dramatic fluctuations between institutions since the lifting of the cap in 2015/16 has kept directors of estates and of accommodation up at night, faced with a sudden lack (or surplus) of teaching space or beds. It has made capital planning difficult for universities and investment decisions difficult for the private sector.

This situation is now showing signs of settling back into stability, and the Review is clear on its aversion to reintroducing a universal student number cap. It does advocate a cap to provide OfS with some control over ‘courses that persistently manifest poor value for money for students and the public’, but this seems to be envisaged as a minor and localised measure. Generally, the headline-grabbing proposals (reducing the student fee cap to £7,500, reducing tuition fees, and reintroducing means-tested maintenance grants) would probably have the net effect of increasing student numbers, even if the small print of lower repayment thresholds and longer repayment periods may mean some graduates pay more (and for longer) than under the current system.

So, in short, with the big reveal of the Augar Review, levels of uncertainty have not changed overnight. But nor have they become worse. And the mood that we are sensing among the universities that we work with and talk to is one of keeping on keeping on; of having the confidence in their own core business and the overall strength of the HE sector to press on with investment, with projects, with improvements.

In fact, we have seen universities acclimatising to this new level of uncertainty. It has almost, but not quite, become the new normal. Scenario planning has now become an essential component of the estate strategies we have been working on. We have modelled ‘what-if’ scenarios around student number growth, to understand what quantum of teaching space and beds a university will need if numbers either mushroom or flat-line, and then helped to future-proof that strategy by identifying a common ground. The work has become much more similar to (and influenced by) the approach our colleagues take with their corporate clients to help navigate their estates through the clashing rocks of volatile markets.