Is Council Tax The Final Straw That Will Kill The University?

Portsmouth, like many councils, has outsourced collection of council tax to a private company with a view to maximising their income and thus reduce the impact of cutbacks on the services they provide. This is commendable, but when it comes to student accommodation, we fear it may hurt students, the University and the council itself in the longer term.

In the past, student properties were classed as exempt. The council was and is recompensed by way of the 'Formula Grant" calculation which gives them an increase in their central government funding equivalent to one band 'D" property for every 5 exempt students. So 100 students in the city would generate central government funding for the city equivalent to the Council Tax that would be collected from 20 band D properties.

A band 'D" property is billed £1,257.46p for a year council tax. So, with, say 20,000 students in the city, we can assume that PCC are recompensed in the region of £5M. (That is 4,000 Band D)

Obviously, it is the students who are exempt, not the properties, but on the basis that the Formula Grant was based on a full year Band D equivalent and that properties were only empty for a few days in July and sometimes in Sept, plus the August period when they were being upgraded or refurbished, PCC chose to accept that it was not worth the effort of chasing a few days payment and even if they did, it would not be fair as they already had payment equivalent to what they would have received had a family lived in the property.

Under the new approach, every day from when a 1st year moves in, until the day they start their course, is billed. Every day from when a final year student ends their course is also billed - so a group that comprises a 1st year  arriving on 1st Sept and starting his or her course on 23rd Sept  and a final year whose final exam is in March, may result in council tax billing for more than 6 months of the year. Likewise, if someone drops out but stays in the property - which often happens unbeknown to the landlord, council tax will be due.

The Uni recommend and urge that we contract with each student separately. This makes sense - it is often the case that not everyone in the house knows everyone else, and even then, not well enough to trust them such that you are responsible for any damage or rent arrears of anyone in the property. However, PCC will go after the landlord for Council Tax (CT) payments when individual contracts are in place, but will bill the tenant/s when a joint contract is used.

Against this background, we have members who will only use joint contracts and if it means that they can then budget for 1 months CT per year (the student joint contract running for the other 11 months from 1st Sept until 31st July), it is hard to argue against their logic.

But either way, if the CT is being billed to the tenants or the landlord, it is the tenants who ultimately pay - either direct in CT or indirectly in increased rents. Our view is that over time, these practices will push up rents for students by 5% (so a £400/month room will increase to £420). We fear this  may have a knock-on effect, on median rents right across the city at a time when many tenants cannot afford a significant increase in their rent.

It also appears unfair as a C4 small HMO in the private sector is no different in terms of term dates or occupants than a C5 student hall, yet the halls are exempt from business rates and council tax as they are occupied by students. This is especially galling as whilst many of our properties sit empty during the summer break, many of the halls are providing accommodation for some of the big events in the city such as the Triathalon, yet still they avoid any contribution.

A typical student will sign up for a 4 year course knowing there are tuition fees of at least £36,000 over the period. Add in accommodation over the period (4 years - each comprising 11 months @ £400/month) of £17,600 plus maintenance loans to cover actually living here and the average student is going to graduate with debts in excess of £60,000.

Back in 2011 the IFS showed that for each increase of £1,000 in fees, University participation rates dropped by 3.9 percentage points - so in the context of Portsmouth, that would be equivalent to losing around 820 students. Since then, student numbers have grown to a point where the expectation of a 'good job" at the end is much lower. According to the Department for Education and Science, just 60% of students end up in full time work relevant to their degree.

With cheaper university options in Europe, the growth of MOOC (Massive Open Online Courses) - Why pay £60,000 to end up jobless with a degree from some provincial UK university when you can learn from the very best at Harvard or Stanford and build a custom CV with the specific education components you need for the career you have chosen? Take-up may not be 'massive" yet but tomorrow? With the increased pressure on finances and growing dissatisfaction with the limited amount of contact time provided by conventional university education, how many more straws will it take to kill this particular golden goose which has done so much to allow Portsmouth to emulate the phoenix post Dockyard and shipbuilding, Zurich Insurance and IBM?