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The Progressive Economics Forum

Tuition Increases by Stealth

On Tuesday night, Peterborough City Council approved a plan for a for-profit corporation to own and operate a new student residence at Trent University.  I’m concerned that this may signal a new trend at Canadian universities; about a year ago, I blogged about a similar plan at the University of Toronto.

I am not opposed to private sector actors being hired to build student housing (or any other kind of housing, for that matter).  Indeed, even when social housing is built, roughly 95 percent of the capital costs go to the private sector to pay engineers, land surveyors, lawyers, labourers and others.  But as I argue in a 2007 policy paper, over the long term, rent increases significantly more when housing is owned and operated by a private entity as opposed to a not-for-profit entity.  This in turn results in increases in rent for other tenants living in the same geographical area.

Thus, when a private entity owns and operates student housing, the cost of rent at some point (especially 10 or 20 years down the road) could easily be $100 more per month than if a not-for-profit entity owned and operated the housing.  For a student living in the housing for a full year, this amounts, in effect, to a $1,200/year tuition increase.  What’s more, these rent increases create upward pressure on rent for tenants throughout the jurisdiction (probably less pressure in municipalities where students make up a small proportion of tenants, and more pressure in municipalities where students make up a larger proportion of tenants…such as in a “university town”).

When senior levels of government and universities allow for-profit entities to own and operate student housing, I believe they do two things.  First, they increase the cost of living for students living in said housing.  Second (and less directly), they increase the cost of living for other students (and other tenants) living near that housing.

I think senior levels of government should work with universities to ensure that for-profit corporations never own and operate student housing.  They should also ensure that student housing owned and operated by universities operates on a revenue-neutral basis (i.e. universities should not use the student housing as a source of revenue to fund other activities).

Enjoy and share:

Comments

Comment from Travis Fast
Time: August 4, 2011, 7:45 am

“Second (and less directly), they increase the cost of living for other students living near that housing.”

That is a feature not a bug. University administrations are increasingly in bed with the local land-developers sometimes they serve directly on the BOG.

Comment from Phil Robinson
Time: August 4, 2011, 9:56 am

Well put Nick. Currently many (if not most) universities are using student housing as a revenue generating activity and are hence behaving like private for-profit corporations.

Comment from Donald Hughes
Time: August 4, 2011, 7:33 pm

If you argue that non-profit housing can deliver the same housing for much cheaper, why even have a dominant private sector in housing at all? As in, couldn’t the rental market be largely converted to non-profit housing over time, making this particular issue of secondary consequence?

Comment from Travis Fast
Time: August 4, 2011, 8:05 pm

“If you argue that non-profit housing can deliver the same housing for much cheaper, why even have a dominant private sector in housing at all? As in, couldn’t the rental market be largely converted to non-profit housing over time, making this particular issue of secondary consequence?”

Good point!

Comment from boris
Time: August 4, 2011, 9:19 pm

The U of Alberta last year built some brand new townhouse style student residences, a portion of which are grad residences. They charged ~$900/month for a bachelor in the grad buildings. When I checked in the mid-year, they still had vacancies, I suspect because that cost is simply unaffordable to most graduate students, even those that are funded. If rents in that private student housing are too high, they might actually find themselves with an excess of vacancies because students will avoid it, especially when there’s cheaper places to be had in the city.

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