Sunday, 28 May 2017

Student Accommodation Update: Big Business Continues to Flock to the Sector

Today’s post represents somewhat of an update on two posts that have come before here in Financial Regulation Matters, concerning the relationship between big business and the student accommodation sector, and then the continued increase that followed. Rather than go over these particular issues again, this post will instead analyse the conclusions emanating from the recent ‘Student Housing Conference’ held on Wednesday, and then expand this analysis to look at some of the issues that may result because of these developments, particularly in relation to the notion of equality and the impact upon studies.

The recent Student Housing Conference, held in London last Wednesday, saw some of the world’s richest individuals and institutional investors flock to Covent Garden, so much so that the annual gathering ‘had grown from 200 people to more than 500’ and ‘potential buyers were forced to stand during presentations’. In addition to this, the new trend sees foreign investment flooding the marketplace, with ‘more than 70% of investment coming from overseas’ because ‘they have seen how much others have made from student housing’. The increase, which is represented by a doubling in sales values last year compared to 2013-15 combined, is one thing, but the development of standards and, crucially, costs for students, is of importance for our understanding. The newspaper article in The Guardian that discusses this issue promotes the notion that, based on research by Knight Frank, students are now ‘willing’ to pay more than £160 per week ‘if the facilities impress them’ – whatever that means. Yet, as is the modus operandi here in Financial Regulation Matters, we must question everything; so, who are these students who are willing to pay more than £640 per month for their accommodation?

The newspaper article discusses the benefits of these accommodation blocks that charge increased rents, ranging from concierge services – that, apparently, will have a ‘chat’ with you if you are feeling homesick - to in-house cinemas that include ‘scarlet velvet love seats’ which, in the words of the designer, ‘at least help today’s students to behave badly’. However, both qualitative and quantitative research is clear on this issue. In terms of the origins of university students, only around 10% of students hailed from private-schooled backgrounds, with one academic study suggesting that University is now aimed at those who rely upon familial wealth – leaving the lower classes, and even the working-middle class ‘squeezed’. The author makes the point that the British Governments, of successive generations, have assumed that families have more wealth than they actually do, which has led to a model that is making the process of bettering oneself via education that much harder. Rather than ‘students’ being concerned with a helpful concierge service, or velvet seats in an in-house cinema, studies actually show students struggling to pay rent, having to accept poorer quality accommodation because of the increased costs in the sector, and working to help fund their living and course costs (often more than they are technically allowed to do so by their Universities). The façade of plush apartments with contemporary amenities covers the reality of an ever-increasing level of student poverty, which is demonstrated clearly in examples like the University of East Anglia establishing a food bank for its students. On this basis, the increase in foreign investment in the sector is particularly bad news for a number of reasons.

The positive headlines that this increased investment brings for our politicians come at a time when the more localised student accommodation sector, one which is, for the most part, unregulated, is coming under pressure. In Warwick and the surrounding areas, to provide just one example, there is a push to rid communities of anti-social behaviour by students by forcing them away from residential communities in shared houses (for example) that are owned by private landlords, into ‘purpose-built’ accommodation. Whilst on the one hand this sounds perfectly reasonable, the other side of the equation is that these residential dwellings are affordable to a number of students, whereas purpose-built accommodation is not. Rather than regulating the residential student accommodation market more tightly, the government and local councils are seemingly more than happy to push students into the purpose-built accommodation that massive investors are flocking to because of the ‘low risk’; it is indeed ‘low risk’ for investors, because the government will continue to set the environment so that ‘consumers’ for continuously pushed towards their products. But, it is not ‘low risk’ for students.

The majority of students in the U.K. do not have familial wealth to call upon. The majority of students are struggling to focus on their studies, because they have to work more than they allowed in order pay their rent, and to feed themselves. As a cohort, the modern-day students are under more pressure than before, face an appalling attack on their mental health, are being forced to use food banks for sustenance and, ultimately, are being deterred at every conceivable angle from bettering themselves and contributing, positively, to society. Even though this post absolutely detests the governmental policies of the Conservative Government, the proposals by the opposition seem to be as equally frustrating, but for different reasons – there are doubts as to the practicality of making tuition free when this current system is so entrenched in its ways; is free tuition even practicable with the current numbers of students? However, this post finishes with a point that crops up consistently here in Financial Regulation Matters – this attachment to extremes is a negative, not a positive. Why is that we must either have students being forced through the offal-machine of big business’ foray into student accommodation, leading them into a mental health/suicide/poverty crisis, or either no tuition fees at all which would likely lead to the reduction in opportunity? This is not the case, but is the one that is presented. It is not unimaginable that residential landlords are held to account for the actions of their student tenants so that communities do not suffer the blight of an unregulated market, whilst it is also not unimaginable that some of the money that is raised via increased tuition fees could be reinvested into purpose-built student accommodation that is not at the mercy of large institutional investors, making it a realistic possibility that poorer students would be available to afford such surroundings without having to starve themselves in the process. In all the stories emanating from this explosion of interest, one element is consistently missing – for the student to prosper, they must be allowed to focus on their studies and give everything they have to their own development; how likely is it that a student will be focusing upon their studies as they make their way to a food bank?

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