Discussion paper – Building the Residential Experience at ANU
1. The Residential Experience
ANU has long believed that the fact that a relatively high proportion of its students live on campus has distinct educational and developmental advantages. It is certainly the case that many of our existing students and alumni see this as an important part of their ANU experience. As such, the University wishes to enhance the quality and affordability of our accommodation whilst also expanding the amount of accommodation available to students.
2. Demand for Accommodation
At present, ANU has approximately 5,000 beds of accommodation on campus. The occupancy rate of this accommodation is approximately 99% and in 2015, it was estimated that more than 1,500 students who wanted to stay on campus were unable to do so. In addition, in order to provide access to students from outside the ACT, the University has regularly limited the amount of accommodation available to students resident in the ACT. It is believed that if these restrictions were lifted, the unmet demand for accommodation would rise further.
Compared to other Australian universities ANU has a very high proportion of latter year returning students (62% compared to the broader sector at 33%). That is, students in years 2, 3 etc. who have previously stayed in on campus accommodation wish to return. This is partly driven by the attractiveness of the residential experience and partly by the shortage of affordable accommodation in the Canberra residential market. The nett result is further pressure on campus accommodation and particularly challenges in meeting the accommodation guarantee which ANU makes to first-year students.
The University has just announced the development of a new Residential Hall (termed SA5) with 500 beds of accommodation, which will provide some relief to this situation.
3. Styles of Accommodation Available
ANU presently has a range of accommodation styles available to students. These include: traditional Residential Halls with a high degree of pastoral care (both catered and self-catered), single and shared apartment accommodation and fully self-contained apartments for more independent students. It is likely that in the future the university will want to maintain such a mix of accommodation to meet the diversity of student requirements. One area where accommodation provision is clearly deficient is in appropriate accommodation for postgraduate students with families.
4. Financial Challenges in Meeting Student Needs
The University presently faces a range of challenges in meeting the needs of present and future students. Many of the Residential Halls on Daley Road are more than 30 years old (some up to 50 years old). As such, they are inefficient to operate and many of these residences are approaching their effective end of life. It is estimated that the cost to replace these Residences is more than $200 million.
One example of this problem is wireless access in student residences. Students are highly critical of the level of wireless access in residences and the University is investing over $2 million over the summer break to install over 2,000 additional wireless access points in student residences. However, ongoing upgrading will be required and the ability to deliver improved services like wireless is made much more difficult and expensive in ageing buildings.
The University has just committed to an expenditure of $50 million for the construction of SA5. To meet the existing unmet demand and future growth estimates is likely to require a further investment of $200 million in coming years.
Such a total expenditure (more than $400 million) is beyond the capability of the University to fund either from cash reserves or by borrowing. The University has less than $200M in uncommitted cash reserves and presently caries loans of more than $200 million, largely associated with student accommodation on Childers Street. In the present fiscal environment there is also no possibility of government funding these requirements.
5. Funding Opportunities
The design of SA5 has broken new ground in Australia. It has been designed as a traditional Residential Hall with extensive student input. Its design has incorporated those elements which students believe important – high levels of pastoral care, spaces in which to socialize and, in this case, shared self-catering facilities. It has also been designed to be affordable. At present, it is believed that it will be one of the least expensive Residences on campus. Further, financial projections indicate that the operation of SA5 will be highly sustainable.
The SA5 model is also one which would be attractive to external investors, both existing alumni who may wish to give back and invest in the future of our students and other investors, such as superannuation funds. In the present low-interest rate environment there are significant numbers of investors considering student accommodation as a low risk investment. These are passive investors, who have little interest in the day to day operation of Residences. As such, ownership and operation can be separated.
The University could own the Residence, although this would require a significant capital investment or an external investor could own the asset. In either case, the University would determine how the Residence was operated. It could be operated by the University or a contracted operator working for the University. In making such a decision the quality of service to the students and the costs of operation are critical. An inefficient operating model would mean that tariffs for students will be higher.
The University has few viable options available to it.
• We could continue with the present situation which would mean very gradual expansion of new accommodation. SA5 would be the extent of this for the foreseeable future. There would be little scope to replace or upgrade the ageing existing Residences. This will probably mean increased tariffs as the maintenance and operating costs of these Residences increase.
• An alternative for the university is to look for external investors to partner with the University in expanding and replacing its residential accommodation. Based on the SA5 model, it is believed that there is a reasonable possibility that it may be practical to expand our existing accommodation, replace our ageing infrastructure and potentially do so with no increase in student tariffs and no investment by the University. In addition, the operating model for our Residences, which is desired by our students could be maintained. The operational responsibility could be provided by the University, externally contracted staff, or a mixture of both.
7. Consultation and Information
Over recent weeks, the Vice-Chancellor has undertaken a range of open discussion forums across the university. These have included student meetings in most of our Halls of Residence, “Ed Talk” forums with students and a public meeting with alumni. In addition a survey of students in residential accommodation has been conducted to understand their needs, their desires for future residential expansion, and their satisfaction with the present facilities. The relative importance of various elements of student accommodation as provided by students is as set out below:
The key points coming from the Vice-Chancellor’s face to face consultations are:
• Students and alumni agree that the residential experience at ANU is a defining element of an ANU education for many students.
• It would be highly desirable to expand residential accommodation to as many students as possible.
• Although the university needs to maintain a range of different forms of accommodation, the major need is for more traditional Hall of Residence accommodation, such as the new SA5.
• Cost of accommodation for students is critical and redeveloped or new accommodation must be as affordable as possible.
• There is wide recognition that much of the accommodation on Daley road needs refurbishment or replacement and that this will require significant investment of resources, as will further expansion.
• It is understood that it may be possible to have alumni or other passive investors contribute to the development of the residential experience. As long as such external parties do not run or influence how the Halls will be run, such investment would be a positive for students and the university.
• Although students highly value their residential experience, they believe the facilities need significant investment to bring them up to modern standards.
• Should it be necessary to demolish and rebuild residences, elements of the old residence should be captured in the new residence, so as to preserve history.
ANU has a desire to both expand the quantity of our residential accommodation and to enhance the quality of that accommodation for students. This needs to be done whilst ensuring tariffs remain low. This is a view held by existing students, alumni and the university itself. As such, the University is exploring the possibilities of what may be an exciting expansion and refurbishment of our residential accommodation. If it is possible to finance such a refurbishment and expansion, it will place the University in a unique position in Australia. No other university would be able to provide such a residential experience for a high percentage of our students.
This paper is intended to provide background for students and alumni. It outlines some exciting possibilities for the University and its students. The magnitude of the investment required is beyond the capabilities of the university to either directly fund or to borrow to finance. As such, the University will shortly test the interest of alumni and passive investors (such as superannuation funds) to invest in such an expansion. Should there be interest in such activities, the university would continue to control the day to day operation of new and existing residences.
Once the process of testing interest in investing in an enhanced residential community is complete, I will communicate further about the best way forward. The possibilities for an enhanced residential experience for more of our students may be possible. This would be an exciting option for the University, its students and alumni and the city of Canberra.