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The Progressive Economics Forum

“Teaming Up” with the Private Sector

Today’s Globe and Mail features an article about the University of Toronto’s plan to turn “to the private sector to solve their campus housing problems” for students.  In particular, the article refers to a plan whereby the U of T would become “the first university in Canada to erect a large tower offsite with private money.”

According to the article, “[t]he university owns half of the site, Knightstone [a private equity firm] owns the other. Knightstone would collect payment from the students, and pay the university a cut as rent.” The article goes on to quote the firm’s CEO saying: “We just want to let the schools focus their capital on education and leave their hotel-like functions to the right partner.”

As I’ve outlined in a 2007 housing policy paper, there are major advantages to keeping the ownership of rental housing public.  As I state in the paper:

“The private sector…has a vested interest in raising as much money from tenants as possible. Thus, not surprisingly, empirical research does confirm that, when it comes to who owns and operates units, the non-profit sector keeps rent down over the long-run when compared to the private sector. Whereas private landlords will tend to raise rents as much as the market (and legislation) allows, non-profits will tend to raise rents only insofar as their costs go up. Thus, it is clear that the non-profit sector is very good at

preserving affordable housing.”

In short, I’m not necessarily opposed to engineers, land surveyors, lawyers and labourers (all of whom are very important in the contruction of housing) coming from the private sector.  But I belive it is in the public interest for housing to be owned and operated by the non-profit sector.

Enjoy and share:


Comment from travis fast
Time: July 15, 2010, 8:23 am

I agree, but universities are effectively part of the private sector with respect to their clients (students). Given current funding arrangements universities may even be worse because they are perennially cash strapped. The trend has been towards moving universities in the direction of full cost recovery so every service has been targeted to increase revenue: from parking, to administrative fees through to housing.

At York university (2000) campus housing was set at market prices with a bachelors running btw 500 & 600 a month (phone and cable not included). It was in fact cheaper and more comfortable for 3 students to rent a three bedroom off-campus and split the utilities.

I agree with your general point about having not for profit housing. I just do not think we should expect the universities to be delivering it under the current funding model and within the current public policy paradigm vis-a-vis post-secondary education. For all intents and purposes universities are now part of the private sector.

This may seem to over state the case but I believe it is keeping with how university administrations and their BOGs have increasingly viewed themselves since McKinney v. University of Guelph (1990). The key outcome of that decision being that the charter does not apply to university governance because the court deemed them to be autonomous and essentially private institutions.

So with BOGs drawn largely from the private sector, governing over legally autonomous and independent (private) institutions and cash strapped what do you think their instincts are going to be via housing policy?

Comment from Nick Falvo
Time: July 15, 2010, 8:29 am

Travis: I wish you were wrong, but I think you’re essentially right.

Comment from travis fast
Time: July 15, 2010, 8:49 am

I wish I were wrong to. It is not easy being in a perpetual state of optimistic lament.

Comment from Dave McPherson
Time: July 15, 2010, 1:26 pm

So a partnership with the student renters or student society in the form of a Coop gets you where you want to go…. me thinks.

Comment from Travis Fast
Time: July 15, 2010, 5:37 pm

Well you kinda need capital to get into housing. The coop part is no more complicated than strata. It is as the non-Marx brother Marx would say about capital.

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