Insight Blog

Student Housing A Hot Sector For Public-Private Partnerships

by Sami Barry
University of Houston student housing

While higher education institutions face many challenges related to facilities management and capital programs, one aspect of their campuses that does not have to suffer from decreased endowments and reductions in capital spending is student housing. That is because student housing has successfully adapted to the economic climate by integrating new concepts, specifically public-private partnerships (P3s). In fact, P3s have become so popular within the student housing sector that these arrangements represent the fastest growing trend in higher education today.

Since their emergence in student housing several years ago, P3s have become important strategies for higher education institutions because of the many benefits they offer, including:

  • Lower developer costs

  • Developer expertise

  • Operational expertise

  • Access to capital

  • Preservation of debt capacity

  • More favorable balance sheets and credit statements

  • Risk mitigation

  • Faster procurement and project delivery (It can typically take a university about 5 years to get a project built. With a P3, that process can be reduced to just 2 years. Additionally, P3s can save approximately 25% in costs compared to typical projects.)

Beyond the above, the indirect advantages of P3s in student housing are numerous, such as they:

  • Provide better housing for students

  • Expand campus capacity

  • Create high-quality facilities

  • Expand the tax base for both a city and county

  • Provide an economic boost to surrounding areas, which likely lead to private growth and other improvements

It is important to note that, while there are many benefits of P3s for higher education institutions, these agreements also have disadvantages that need to be considered, including:

  • High cost of capital

  • Reduced control for the university

  • Complexity of deals

  • Multi-party roles and responsibilities

  • Limitation on future university development

Considering these pros and cons, and the fact that higher education institutions have diverse needs and reasons to consider implementing P3s into their portfolios, there are different arrangements that can be negotiated.

According to Campus Apartments in Philadelphia, a provider of P3 partnerships in the student housing sector, there are four typical structures and operating arrangements:

P3 Agreements 3

The above agreements provide higher education institutions multiple options when exploring if a P3 would be beneficial in addressing their infrastructure needs and student housing capital plans.

Some of the student housing developers that offer these agreements are:

P3s have seen much success within the student housing sector - so much success that they are now expanding into other types of campus infrastructure projects such as parking garages, recreation centers, and even renewable energy initiatives. Going forward, this method is only going to grow within the higher education setting. It will be interesting to see how many more companies jump into the market because of its vitality and potential for long-term profitability.

Sources: California State University, Campus Apartments, NACUBO, Student Housing Business