The Real Deal New York

Public universities turn to private developers for dorm construction

January 25, 2012 12:30PM

Public universities are increasingly turning to the private sector to build and finance the construction of the dorms where their students are housed, the New York Times reported.

The arrangements between universities and developers are mutually beneficial, as they free up capital for schools’ other costs while allowing the developer to profit, since their construction costs are lower due to economies of scale. But critics say that the savings are not being passed on to students.

“These things are often sold as savings, but they don’t often result in savings,” said Edward St. John, a professor at the University of Michigan who writes about privatization.

Portland State University, in Ore., is building a residence hall in a public-private partnership with American Campus Communities, a student housing real estate investment trust. The $90 million mixed-use building should open in August. American Campus will own and manage the complex for up to 85 years, before it reverts to the university. The arrangement causes trepidation for some, as the REIT’s shareholders could push for higer returns and cause student fees to balloon. [NYT]