The cost of studying at The University of Cambridge
The following report is the reply which CUSU provided to the initial Bursar's report that asked for rents in Cambridge to rise to between £56.50 and £62.50 per week.
A discussion of the financial position of Cambridge Colleges and Junior Members of the University, with particular regard to the implications of the Bursars' Commitee Report.
This paper considers the financial status of the Cambridge colleges and their junior members in light of the paper from the Resources and Charges Working Group of the Bursars' Committee, "Addressing the Room Rent Subsidy".
1. Introduction
1.1 The Bursars' Report
Recently both Higher Education Institutions and students have seen cuts in the funding made available to them. The maintenance grant has been abolished, and Cambridge Colleges have had their fee reduced. At the time that the University was negotiating with the government, College finances were reviewed. The College's Committee requested in May 1996 that the Bursars' Committee examine rents paid by Junior members of colleges. Their ambition was to eliminate any 'subsidy' of rents by the colleges, and conclusion was that this would require real rent increases of between 33 and 47%.
In line with HEFCE and student thinking, the Bursars' Committee proposed that Junior Members should be paying the 'full cost' for the rent of rooms in college accommodation. In other words, the rents paid by Junior Members should be set so as to cover the costs incurred in providing that accommodation. At the very least public funds (i.e. the College Fee) should not be used to subsidise accommodation. (HEFCE briefing 5.96)
The executive summary of the Working Group's report concluded that: "the evidence is overwhelming that, despite some catch-up in recent years, the room rents typically charged by Cambridge colleges to their junior members still include a substantial element of subsidy (and are markedly lower than in most other universities, including Oxford)".
We strongly contest that the 'evidence' is even convincing. The Group's method of addressing the room rent subsidy was to determine 'economic' rent by comparing college rents to other universities, open market rents in Cambridge, and college's cost of providing and maintaining student accommodation.
It appears that the Group has not investigated the third definition of rent fully and we challenge much of the material and premises used in arguing for the first two definitions.
We believe that the Group's proposals would take Cambridge rents substantially above the running costs associated with providing student housing. Colleges have a duty to run the accommodation in a way that is economic and efficient. If the levels of rents need to be increased to the extent that the Group suggests, students would be subsidising inefficiency and profligacy.
It is our contention that the total fixed cost of living in Cambridge should not be higher than in comparable Higher Education Institutions. This is only just the case today, and would certainly not be true were rents to rise by even a fraction of the magnitude proposed by the Bursars' Committee.
1.2. Colleges' financial position
The Government's review of the extra funding attributed to Oxbridge colleges resulted in a reduction of the Colleges' income by approximately 33% over a period of 10 years. It is reasonable that in the light of this substantial cut in income the colleges should want to review their financial position.
At present it is difficult to ascertain a breakdown of college expenditure. Individual Colleges are often wary of making their accounts available to Student Representatives, and when they are, accounting methods that bulk varied expenditure into accommodating headings make them extremely opaque. As a result it is not evident that raising room rents is the most rational way of balancing college finances. There are still too many examples of a high-expenditure culture and inefficiency to justify the cuts in funding to be automatically passed on to students. It is clear that the burden of proof in raising rents lies with the Colleges.
We feel that the Government cut the College Fee in the belief that the colleges could operate more efficiently and cut their extraneous activities, not that the financial burden should be shifted onto their students.
1.3. Students' financial position
Any moves towards increasing student charges should always be considered in light of the financial position of both present and future Junior Members.
Students now have less disposable income whilst at University than ever before, and on leaving higher education are faced with considerable levels of debt. The average student can anticipate owing about £9,000.
For the colleges to reconcile their loss of income by raising student charges without making sustained and determined attempts to trim costs is wrong, especially when students' ability to pay is lower than ever before.
2. Definitions of the Bursars' Report
The report of the Resources and Charges Working Group of the Bursars' Committee "sought information to measure existing college rent against" market rents in Cambridge, rents charged to students at other Universities and the running costs of providing student accommodation. Each of these comparisons will be dealt with in turn.
2.1 Market Rents
In deciding on the appropriate level for student rents the Bursars' Report considered 'Market Rents' in Cambridge. This approach is felt to be unacceptable for multiple reasons.
Market rent includes a substantial element of profit (return above the running costs of providing the accommodation). This is after all the motivation for landlords participating in this activity. Were 'market levels' to determine college rent levels then students would, in effect, be subsidising Colleges.
Private landlords do not benefit from the considerable economies of scale open to colleges. There is also no real element of risk in college room provision. Short of a collapse in applications they will always be able to guarantee having rooms filled, unlike private providers of accommodation.
Furthermore Cambridge City rents are heavily inflated for the service provided due to the City's significant housing shortage and dominance of the colleges in this sector. Penalising students for the failure of adequate long term city planning and University hegemony over Cambridge accommodation seems deeply unjust.
All of the above support the conclusion that the survey of 'market rents' undertaken by the Bursars' Report produced highly misleading conclusions. We would argue that the methodology used was so flawed as to negate the results.
2.2 Rents at comparable Universities
The selection of comparable universitities in the Bursars' Report was unrepresentative and quite arbitrary. When considering regions quoted in the NUS accommodation costs survey Cambridge colleges were compared with East Anglia, London and the South East. While the first could be argued due to Cambridge's geographical location, the selection of the two most expensive areas of the country in a cross-national comparison seems both non-sensical and deeply misleading. The national average weekly charge for self-catering single rooms (the norm in Cambridge colleges) for 1997/1998 was £45.56. The national average excluding London (where students are given increased income to compensate for the capital's higher costs) was £42.80. These figures are the compulsory fixed costs students have to pay, and include access to canteens, sometimes at discounted prices.
A more detailed and comprehensive study of the fixed costs of living at comparable institutions indicates that Cambridge rents are currently slightly, but not significantly, above the average (Table 1). In selecting universities for this comparison it seemed sensible to look at both those to which an average applicant would consider alongside Cambridge (Source: Daily Telegraph top ten universities 17/2/99). Such a comparison offers compelling evidence that were College rents to rise in real terms then Cambridge would become significantly more expensive than many competing institutions.
The Bursars' figure for Cambridge average rent of £42.60, and their report in general, makes no reference to the Kitchen Fixed Charge of around £9.50 a week that students are forced to pay. This compulsory levy varies from college to college and is purported to be spent on different things; some argue it is a canteen subsidy, others have renamed it the College Charge and said that it goes on 'communal facilities'. It is worth noting, however, that even though the overwhelming majority of other universities do not have this compulsory levy some offer subsidised canteen food. York, for example, provides low cost meals while still charging a total weekly bill of £38.78. It also seems relevant that it is often the students most affected by hardship that self-cater; thus being forced to pay a fee for which they obtain negligible benefit. A student cooking for him or herself at Balliol College, Oxford would currently face a weekly bill of £39.70, while at most Cambridge colleges the bill would be in excess of £50. A detailed comparison of rents, total costs and marginal meal costs is given in Tables 1 and 2 and Figure 1.
It was suggested by the Bursars' Report that a justification for higher Cambridge rents is the fact that students only have to pay for ten weeks. However it seems unreasonable to punish students with higher weekly rents because they are given access to their accommodation for a shorter period of time. Many students feel the need to stay in residence for a longer period of time (for exampleduring the Easter vacation preceding Tripos Examinations) and then have to pay inflated rates, other students are promptly forced out of their rooms at the end of term to allow for the highly profitable conference trade. It is not true that shorter periods of residence are a singularly Cambridge phenomenon: York, Warwick, Bristol, Bath and Nottingham have periods of residence of between 30 and 32 weeks a year as well as similar or lower rent levels.
Considering the very limited nature of the Bursars' comparisons, the lack of transparency of the provision examined and the selective and superficial quotations from the NUS Accommodation Survey used in their report, we would question the validity or robustness of their conclusions.
2.3 Running Costs.
The Bursars' Report used a method of defining running costs that involved an apportionment of the running costs (including maintenance) of College buildings and grounds between the Fellowship and Junior Members. Although, given the state of the College Internal Revenue Accounts provided to the University, we appreciate why such an approach was taken, we do not believe that it allows an accurate estimate of the running costs of student accomodation to be made.
It is possible to identify four elements in the running costs associated with student accomodation.
(i) Wear and tear. The HEI sector average cost of new build is £25,000 (not £35,000 as stated in the Bursars' report). Major 20-year refurbishment of buildings to 25% of the build cost would seem reasonable, giving an annual cost of £625. Using the HEFCE insurance cost of new build (1.5%), as has been suggested by some Bursars, gives a cost of £375 p.a.. Alternatively, using a 40-year bond yield of 7% of the new-build cost gives an annual cost of £1750. It seems reasonable to take the median of these figures (refurbishment), equivalent to £20.83 p.w., especially since most new build is financed from donations.
(ii) Routine Maintainance. The cost of painting, furniture and fittings, and of kitchens within the definition of normal wear and tear also needs to be accounted for. Estimating these to be £5,000 every 5 years plus an extra £10,000 every ten years for five rooms and a kitchen gives an annual cost of £400 per room, or £13.33 p.w..
(iii) Heating and lighting. Estimating the utility bill for an entire 4 bedroom house to be £300 per quarter, and then equating this to the termly bill for four college rooms gives a weekly charge per room of £7.50.
(iv) Cleaning. Based upon a total cost of employment of £8 per hour including consumables, and estimating the time required to empty a bin each day, clean a room once per week and clean common areas daily as 4 hours per week for a 5-room group gives a weekly cost per room of £6.40.
The sum of all these costs is £48.06, slightly higher than existing average rents of £42 p.w.. After assigning 1/4 of the refurbishment cost to conferences covering the long vacation term, however, this figure decreases to £42.86 p.w., barely more than the existing average room rent of £42.60 p.w..
However, we do not beleive that there is any justification for apportioning any other costs associated with operating a Cambridge College onto Junior Members. Central facilities such as bars, dining halls, supervision rooms, seminar rooms, MCR/JCR facilities, administrative offices etc. are all costs unconnected to providing accomodation and therefore should be funded from tuition fees (HEFCE circular 5.96). This also represents normal practice at other HEI's.
No account has been taken here of the opportunity cost of captial tied up in accomodation. There is no market to determine the value of most college buildings, and hence no estimate can be made of the revenue foregone in owning these buildings, rather than selling them for interest-yielding assets. Many buildings are funded by bequests for the specific purpose of building new accomodation; were an estimate of capital value possible for these buildings, it would be inappropriate to view this as an opportunity cost.
A further issue is how income from conferences is considered. The major reason that College rooms are available for such a short period of time is to maximise conference income. Furthermore, costs are raised by facilities provided for conferences, for example the provision of en-suite bathrooms. Therefore it might be reasonable to apportion a greater proportion of accomodation costs to conference income than in the above calculation.
It is not possible to accurately assess the actual costs of providing accomodation from the College accounts available to us, but the estimates above should provide a reasonable estimate of the cost in an efficient operating anvironment. During negotiations we would argue that it is incumbent upon Bursars' to show where their costs are higher than those calculated above, including a breakdown of staff, consumable and capital expenditure, and how it is spent on rooms as opposed to general college expenditure.
3. Access
The University of Cambridge is perceived to be expensive to attend. Currently it is argued that this is unfounded. However, should the recommendations of the Bursars' Report be adopted Cambridge would be one of the most expensive Higher Education Institutions to study at with student rent levels almost on a par with much of London and markedly above Oxford (see section 2.2 for comparable universities' rent levels).
In 1997 the CVCP and the University of Cambridge argued that the abolition of the maintenance grant would be a deterrent to applicants from lower income backgrounds. Not to argue the same in regards to higher rents is incoherent. As the University's Access Steering Committee has stated, "Were the fixed costs of studying at Cambridge to become greater than at comparable Universities, then the implications for access would be severe".
One of the Univeristy's strongest positive access messages in light of its elitist image is that "Cambridge is not more expensiv than comparable Universities". Those doing Target Schools and GEEMA visits* have repeatedly stated that the "not more expensive than other univerisities" message is probably the single most important fact in persuading people from under-represented backgrounds to apply. The research into comparable universitities indicates that were rents to increase by one percentage or more in real terms for each of the next six years then Cambridge would find itself amongst the most expensive third of institutions in the country. The potential damage to efforts to widen access is incalculable but likely to be extremely severe.
Even if provision of Hardship and Access funds is radically increased, the effect of higher student charges is not likely to be alleviated. When applying students can only be sure of the cost of their maintenance, while availability of hardship funds to individuals can only be ascertained after arrival in Cambridge. Uncertainty in regards to funding would be a strong deterrent to potential applicants. Means testing for these funds is reliant on the government's means testing for tuition fees. An increasing number of those from middle-income backgrounds would be left outside the system of benefits, with further implications for access in the lower ranges of this socio-economic tier. *(Group to Encourage Ethnic Minority Applicants)
4. Conclusion and Reccomendations
1. Cambridge Market rents cannot be used as a tool to assess the appropriate level of College rent. The methodology employed by the Bursars' is so seriously flawed as to negate the conclusions derived from it.
2. The selective and misleading comparisons used in the Bursars' Report heavily distort their assessment of comparable University room rents. A more comprehensive study indicates that Cambridge rents are currently just slightly more expensive than the average (NUS Accommodation Survey).
3. Given the opacity of College Accounts it is almost impossible to estimate the actual costs of providing the accomodation. The inclusion in the Bursars' calculations of large expenditures which do not directly relate to the student residencies invalidates their conclusions. The burden of proof for any rent rises lies with the proposers. College accounts should be both transparent and available to Junior Members.
4. When considering an appropriate level of rent, the total fixed cost of living should be used in discussion (including KFC and otherfixed charges).
5. We therefore recommend the immediate withdrawl of the Bursars' Committee Resources and Charges Working Group Paper "Addressing the Room Rent Subsidy".
6. A real terms annual rent increase of above 1% for each of the next six years would place Cambridge in the most expensive third of comparable universities. An increase of 2% would result in the University being in the top 20%. Therefore any increase in rents must be no higher than inflation.
7. Higher fixed costs of living at Cambridge than at comparable universities will have a detrimental effect on applications from already under-represented groups.
8. To bridge a funding gap by damaging access will not help Cambridge University. Retention of the remaining two-thirds of the College Fee is dependant on radically improving this University's admissions profile.
Tuesday, 2nd March 1999
On behalf of CUSU Council:
M. P. Coakley K
D. Dye CTH
M. Evans CL
R. J. Lawrence F
P. Ramos Pinto DOW
A. T. Wilson SE