We prove that the universal lattices -- the groups $G=\SL_d(R)$ where $R=\Z[x_1,...,x_k]$, have property $\tau$ for $d\geq 3$. This provides the first example of linear groups with $\tau$ which do not come from arithmetic groups. We also give a lower bound for the expanding constant with respect to the natural generating set of $G$. Our methods are based on bounded elementary generation of the finite congruence images of $G$, a generalization of a result by Dennis and Stein on $K_2$ of some f...