_The Augar Review - at a glance

Last week, the government published the long-awaited findings of the Augar Review. The independent government-commissioned report highlights a number of recommendations for post-18 education which, if enacted, could have wide-ranging consequences for the higher education sector.

The headline undergraduate fee cut was widely speculated on ahead of the release and, indeed, a recommendation that tuition fees are capped at £7,500 (down from £9,250 currently) dominates most of the headlines, alongside more financial support for disadvantaged students.

Here we look at the possible implications of the review for purpose-built student accommodation (PBSA) operators and investors.

What does it mean for student housing providers?

Whilst no specific recommendations were made with regards to the provision of accommodation, the cost of accommodation is raised within the review as a key concern.

It notes that the public subsidy of student maintenance, much of which is spent on accommodation, gives the government a legitimate stake in monitoring provision in terms of costs, rents, profitability and value for money – a task it indicates should be monitored by the Office for Students (OFS).

In order to achieve this it suggests the OFS seeks to gain a clearer picture of private sector involvement in student accommodation, recommending it commissions a comprehensive financial analysis of private developers and operators of PBSA to understand the profits that businesses and investors are making from student rents.

“The private sector is increasing relied upon by universities to deliver student accommodation, both on and off campus. In examining the recommendations from the Augar Review the government must recognise the vital role that this accommodation is playing in supporting the overall university experience and strong outcomes for students” according to James Pullan, Global Head of Student Property at Knight Frank.

In addition, the review links accommodation with wellbeing and indicates that universities retain a responsibility for overall student welfare and delivering value for money and that this extends to university accommodation, whether or not they are the direct provider.

Will universities be worse off?

If the panel’s recommendations are implemented in full, the higher education sector as a whole should receive the same total amount of funding, but it will be distributed differently.

Whilst tuition fee income will fall from £9,250 to £7,500 a year per student, the review indicates that the government would step in to top up the difference via direct teaching grants – an estimated £2bn. 

However, under the recommendations the government would have discretion to adjust allocations dependant on course. Courses which are perceived to offer poor value for money may, as a result, receive less allocation at the expense of courses which the government believes are costlier, strategically more important for economic prosperity or of higher quality.

The review also recommends an extension of the 2018/19 and 2019/20 freeze of the average per-student funding for a further three years.

This equates to a real terms reduction of 8% between 2019/20 and 2022/23, and a reduction of 11% compared to 2018/19 funding levels. This freeze aligns with the current plan for a government spending review covering the years in the current parliament, up to 2022/23. 

This does pose a significant challenge to the sector. However, the review believes that these pressures can be alleviated by a growth in the number of UK students. The review projects an increase from 2020 onwards, surpassing 2009 levels (6% higher than currently) by 2025.

The report is a good place to start understanding the challenges facing Higher Education. For further information email: Matthew Bowen