Housing speculation, student debt, fees and dispossession; a 21st century love story - Communique concerning UCL Stratford

 Housing speculation, student debt, fees and dispossession; a 21st century love story - Communique concerning UCL Stratford

An article from the website of The Imaginary Party exposing the relationships between tuition fees, rents, student debt, university funding, and private equity funds, in the context of UCL's £1bn plans to dispossess the 300 residents of the Carpenters Estate in Stratford in order to build "profitable" student housing units.

There are several questions we have all been asking over these last few years. Where will we live? How will we be able to afford such expensive rent in London? How will we find jobs that pay enough to enjoy ourselves and live in comfort? When will we pay back our student debt? How?

We must be clear from the beginning, all the questions articulated above maintain a certain tie to one another. They are not unrelated problems, haphazardly assembled by the hands of mundane serendipity, the chaotic and capricious whim of fortuna, the inevitability of everyday life. No, we insist that they are all preciously constructed, maintained and reproduced in order to cultivate a certain set of social relations and a particular way of doing things. What ties them all together is debt, your debt, and the surplus that it creates being appropriated by Swiss private equity firms, Gulf state sovereign wealth funds, US and Japanese pension funds.

The Financial Times writes with earnest regularity on how the London student residential market represents a major source of income in these hard times for our mendicant investors, now on average making ten times the returns when compared to residential property from elsewhere in the UK. The student housing sector has ballooned from a fringe investment 10 years ago to a global market worth $200bn today with it becoming a ‘must have investment for most large funds’.

At the same time that we observe huge speculation on student accommodation and the ferocious entrance of private equity into the sector, we also see universities, now both sides of the Atlantic, issuing bonds secured against future earnings from tuition fees. The primary example here is the University of California which is presently in $13 billion debt as a consequence of various bond issues over the years and now, much as is the case with the sovereign debt of Greece and Spain, has to issue new bonds to ‘roll over’ the repayment of old ones. For institutions such as UCSC within the University of California the fact that there is no cap on fees, combined with the perpetual demand for college degrees (this is after all the only way one may enter the labour market for the overwhelming majority of ‘well paid’ jobs) means that despite their status as heavily leveraged institutions which for potential investors would not seem like a particularly good bet - they remain investment grade.

Subsequently the capacity of UCSC to raise tuition fees to whatever level it likes is advertised in every bond prospectus. Despite its high levels of debt UCSC is still seen as investment worthy precisely because it can charge what it likes, and as is meant to be the case, there are more applicants than places. This is not regarded as academic competition by university management however, rather it is seen as a situation of over-demand and insufficient supply, and hence the signal to further increase tuition fees until equilibrium and the ‘just’ price is found. Market equilibrium magistra vitae est.

We feel it important that students are in full receipt of these facts and are confronted with the inevitable outcome that the present cap of £9000 on tuition fees will not remain with us for long. Already we expect that the Russell Group of universities is lobbying to have it removed. Elsewhere those institutions such as De Montfort who, like UCSC, have begun to issue their own bonds will also need the cap to be abolished in order to guarantee the lowest costs for the debt-financing of future projects - a necessity in light of government funding being all but scrapped.

The present cap will soon go, and institutions as disparate as Cambridge and De Montfort are now issuing their own bonds. The university increasingly resembles little more than a debt factory. This is not glib comment, a casual and speculative refrain, but merely a statement of observable fact. Our future looks like Santa Cruz, only without the beach.

University College London have recently embarked on a £1 billion project - the extension of their London campus into Stratford. The fact that an institution which is failing to balance budgets in the short-to-medium term amid the most volatile period for higher education funding in decades is choosing to embark on such a large and unprecedented expansion is remarkable. Remarkable, but also of its time, in so much as it brings together many elements of the present moment and various catalysts for future crisis and present suffering. The dispossession of the land of those 300 people who still live there and the debt-financed investment in real estate and speculation on student housing, primarily for wealthier non-EU students. Social housing replaced by student housing funds run by private wealth managers, education no longer about capabilities and learning but merely a means by which to create returns from a relationship of debt.

UCL Stratford thus brings together many of the problems that you yourself face - impossible rent, debt, high fees. As a fee-paying student you are a cash cow - not just when you study, but even when you live in student accommodation. The institution does not serve your needs, rather you serve its need to service its debt and finance an ever larger number of managers who wish to ‘invest’ in land speculation and high-end residential buildings and perhaps even a few research centres. You may think of yourself as a part of the student body, but for the ‘bond guys’ and the more intelligent ones in university management you are simply thought of as what creates ‘returns’.

Universities are increasingly disposed to entering into what can only be described as PFI agreements with private equity and these ‘student housing funds’ to fund the construction of housing that students can live in throughout their university ‘experience’. We see this in the recent £1billion development in Cambridge that will see 3,000 new residential units for students - paid for in part by a £350 million 40 year bond - in partnership with private capital.

As UK universities increasingly employ financial instruments like those seen in California such as long-term bonds (which should really be called securities) students will be seen as no more than producers of the means of repayment, their debt the axis that produces the wheel turning for private investors seeking safe and strong returns and keeping the university afloat as public funding contracts to the point of an almost infinitesimal gesture that borders upon nothingness. This is your future as a debt, a debtor, the guarantor of returns for private equity and pension funds. You will be the assurance against loans that will pay for building facilities and housing that will mean more students who can pay more fees and more rent in order to secure yet more facilities and housing. And so on. All the time fees increasing in order to find equilibrium, rent increasing as there is quite literally nowhere else for you to live and the sons and daughters of the wealthiest families from across the globe are willing to pay.

UCL Stratford represents an active act of dispossession, taking people by force from their homes if necessary. It is pure, unadulterated violence. It has a direct relationship to your debt and the fact that rent in London is increasingly untenable for all but the very wealthiest individuals. Like the university, student housing is a debt factory. UCL Stratford, much like this whole miserable future on offer, can not be allowed to happen. If it does, if these projects and this system continue unimpeded, our lives will be miserable, brutish and shit - make no mistake about it.

Find each other. Educate, Escalate, Destroy.

Courtesy of the Imaginary Party Collaterized Loan Obligation Escalation Working Group (IPCLOEWG)

Posted By

Dec 5 2012 09:18


  • The university increasingly resembles little more than a debt factory [...] social housing replaced by student housing funds run by private wealth managers, education no longer about capabilities and learning but merely a means by which to create returns from a relationship of debt.

    Imaginary Party Collaterized Loan Obligation Escalation Working Group (IPCLOEWG)

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Dec 5 2012 10:44

This is good, but one thing I think it misses in thinking about UCL's motivations for the Stratford development is the impact of the change in caps of student places.

Historically universities in the UK have been limited in the number of students they are allowed to accept in any one year, there are specific caps for every institution. The latest higher education bill begins to change that, however. There will now be a core of places which are still capped per institution but also two additional pools which are uncapped, and from which universities can take as many students as they want - provided certain criteria are met. Specifically one pool is constituted of students who get AAB or better at A-levels and the other is a fixed percentage of the remaining students applying to university but which is open only to universities which have low enough fees. Over time it is expected that these two pools will gradually expand while the core pool shrinks until only the high grade and low fee pools remain. At this point universities can take as many students as they want with no restriction, but they will have to pick either to keep fees low, or to be able to attract the "best" students. This will obviously lead to a polarisation of institutions and to substantial cuts in departments, pay and conditions at those that are forced to lower their fees to get enough students to stay solvent - given the almost total cuts to teaching budgets the majority of their funding will now follow students.

In this situation a "good" university like UCL, which already gets more applications from AAB students than it can take, has an opportunity if it can expand its capacity. By taking a larger share of the AAB+ students it reduces the number available to its competitors therby making them less financially viable and forcing some of them either to specialise in only a few subjects and close other departments or to generally cut across the board and lower their fees. This generally consolidates UCL's position in the top tier of universities and guarantees it a larger and more secure funding base into the future, even if the cap on fees doesn't change (though I agree with the authors that it is highly likely that the cap will be removed at some point in the future).