Britain: Student housing - Big business rakes in the profits as students suffer

As we begin the new academic year thousands of students up down the country will be leaving home for the first time to begin their Higher Education (HE) studies. Unfortunately for these students what should be an exciting and liberating occasion is overshadowed by the colossal debt they will be forced to take on as they become the first to pay the new £9,000 a year tuition fees.

For those who have chosen to study away from home, this eye-watering sum is just one of a myriad of costs they will be faced with, not least among them - rent. Except for the privileged few, whose parents can afford to fund their studies, being a student in 2012 simply means joining everyone else in the on-going struggle to make ends meet.

Given the situation that students face it might come as a surprise that international finance capital and property investors are pouring millions of pounds into student housing in search of mega profits. Although the global crisis of capitalism has meant austerity and poverty for the 99% ,for the capitalist class it has meant a vast accumulation of money – areas for a profitable investment have dwindled.

Normally businesses reinvest a portion of their profits to increase production in the hope of selling more goods and thereby increasing their profits. However, when we are in a recession caused by an overabundance of goods that cannot be sold, who wants to invest to produce even more? Combined with ever increasing inflation and the tumbling value of stock exchanges the world, over this causes the capitalist class to desperately seek somewhere ‘safe’ to stash their loot, hence the huge rise in the price of gold for example.

Student exploitation

It is in this context that student housing in the UK has been identified as the hot new ‘safe’ investment. Spurred by under-supply and guaranteed student demand, investors have been falling over themselves to get a piece of the action. Student housing is far more lucrative than traditional accommodation blocks as developers can cram in hundreds of tiny rooms rather than space-devouring individual flats. Planning laws act to encourage this. The usual requirement to include ‘affordable’ housing in any new development is waived when it comes to student housing.

During the first six months of this year, investment in student housing more than doubled compared with the same period in 2011, hitting over £800m with much of the money coming for overseas. Unite, the largest private student housing provider with a portfolio of 40,000 beds across the UK , last month reported a doubling of interim pre-tax profits to £33.5m. With profits like those it's easy to see why investors are so keen.

The roots of this profit bonanza lie in the massive expansion of Private Finance Initiative (PFI) by universities over the past decade. Despite taking on increasing numbers of students, universities faced a funding crisis as the government systematically cut their budgets. They needed somewhere to put the new students but lacked the resources to build the necessary housing. Encouraged by the government, who were pulling the same trick with schools and hospitals, universities turned to PFI whereby private companies would construct the halls of residence then rent it back to the university at exorbitant rates. The first residents of a Unite-constructed hall in Liverpool - who had to deal with excrement leaking from the showers while paying vastly inflated rent - will probably tell you: PFI generally meant paying a lot more for a worse service.

This didn’t hold back the growth of PFI however. One of the early schemes, the University Partnerships Programme (UPP), was sold earlier this year by Barclays Bank for £1.4bn, to PGGM, a Dutch pension fund. UPP has a portfolio of 28,000 rooms and a rent roll of £89m. The group last year secured a £200m deal with the University of Reading to run a 125-year concession for its accommodation and plans to increase its stock to 35,000 rooms by 2014.

This has led to a situation where in London 35% of all student housing is now provided by the private sector, in Birmingham the figure is even higher with almost half of all student accommodation in private hands. But these figures don’t tell the whole story as just under half a million students live in privately rented accommodation outside of traditional student housing.

This process of privatisation is one that has played out across all sectors of the state in the past period and is eerily reminiscent of the Care Home investment bubble (read www.socialist.net: “Britain’s care homes in crisis: Nationalise them now!”). The privatisation of formerly state services that occurred simultaneously across the developed world is neither accidental nor the product of neo-liberal ideology, but has roots in the contradictions of capitalism itself.

Britain was long ago transformed into a rentier economy where the owners of capital seek profits not by investing in the production of useful goods but by creating vast sums of fictitious capital totally and parasitically leeching off the state. As we have explained elsewhere, the crisis of capitalism is at heart a crisis of overproduction made worse because workers cannot afford to buy back the very goods that they produce. In such a situation the capitalists force governments to open up new areas of the economy for exploitation, this is the motivation for privatisation.

If students were to listen to the mouthpieces of neo-liberalism that pass for economics lecturers these days, they might be forgiven for thinking all this private sector investment and competition would produce lower rents. Unfortunately for students it has had the opposite effect. The most recent NUS accommodation survey shows that rent for student housing actually increased by 21.9% between 2008 and 2010! If the rest of the rental market is anything to go by, it would be reasonable to assume that rents increased by a similar amount between 2010 and 2012. So rampant is the inflation of housing costs in the UK that the homelessness charity ‘Shelter’ has calculated that if general inflation kept pace, a chicken would now cost £47.50!

Britain is in the midst of a deep housing crisis. Homelessness has risen by 14% in the last year alone while thousands of families languish on the council house waiting list with no hope of ever receiving affordable accommodation. Yet the market remains unable to provide the quality housing that we so desperately need, instead they construct ‘luxury’ halls of residence that students are forced to pay over the odds for. The problems faced by students have the same cause as those faced by workers. As such we need to fight together for a common solution. As a first step the NUS should work together with the unions to organise a militant campaign to fight for affordable quality housing for all:

• No to privatisation of student halls of residence!
• For the immediate introduction of rent controls!
• Nationalise private rented housing, in order to immediately lower rents and improve standards, under tenants and workers control!
• Begin a massive programme of decent social housing!

Source: Socialist Appeal (Britain)