P3 or University-Built: Choosing the Right Path for Student Housing Development

Universities face a fundamental choice when addressing student housing shortages and older facilities that need to be rebuilt. Should they build and operate facilities themselves, or partner with private developers through Public-Private Partnerships (P3s)? Each approach carries distinct advantages and trade-offs that extend far beyond initial construction costs. For a side-by-side comparison of P3 and university-built models, see our infographic breaking down the key pros and cons of each approach.

This decision shapes how universities allocate resources, handle risk, and manage the student experience for decades. UC Merced doubled its housing capacity through a $1.2 billion P3 without adding state debt, while USC invested directly in housing to reduce neighborhood pressure and maintain affordability standards. Both strategies work, but for different reasons and in different circumstances.

University-Built Housing: Control and Long-Term Ownership

When universities build and run their own housing, they control everything. Decisions get made based on what’s best for student life and academic goals, not what maximizes profit. And when things go wrong, the university owns it, without having any outside partner as a scapegoat.

Financial control matters too. All rental income stays within the institution, creating an ongoing revenue stream that supports other campus initiatives. Design and construction schedules integrate more easily into campus master plans, and facilities are built to university standards with 50-plus-year lifespans. USC took this route to address a specific community problem. By building more on-campus beds, the university pulled students out of the rental market, which gave local residents a fighting chance against market-driven rent increases. The strategy worked because USC could add supply faster than waiting for the private market to respond.

Northern Kentucky University went the same route. They designed their residence halls with student wellness as their leading goal, such as energy-efficient kitchens, flexible shared spaces where students actually gather, and common areas that build community. These weren’t profit-driven decisions. When housing ties directly to what a university stands for, most schools would rather make those calls themselves than let an outside partner optimize the facilities for returns.

But control isn’t free. Universities foot the bill for everything, including design, construction, permits, and more. Schools low on cash can’t build what their students need, no matter how bad the housing crunch gets. And the costs don’t stop at the ribbon-cutting. Budgets take a hit every year with maintenance, staffing, and keeping up with campus building standards. All of this money could fund scholarships or faculty positions instead. During the project, if the budget blows up or runs six months late during construction, the university covers it. If enrollment is down a few years with few students in housing paying rent, the university has to eat those losses.

Public-Private Partnerships: Speed and Shared Risk

P3s work the opposite way. Private money funds the project, so universities don’t burn through their own reserves or pile on more debt. And private developers can deliver quickly once these deals are brokered.  When the University of Utah partnered with American Campus Communities to add up to 5,000 beds over the next decade, the university retained land ownership while private partners handled financing, construction, and operations. This preserved the university’s balance sheet for academic investments.

The risk shift is real. When costs spike, construction drags, or student enrollment is down, that becomes the developer’s problem, not the universities’. Private developers also move faster with some stages of the project, since they’re not wrestling with committee approvals and procurement rules that bog down university projects. UC Merced’s massive expansion was delivered on time and on budget through a P3 structure that covered design, construction, operations, and maintenance for 39 years, allowing the university to focus on academics rather than facilities management.

P3 developers also bring market-driven expertise in housing management, design, and amenities that may exceed traditional university offerings. Florida International University (FIU) used a P3 to build waterfront student housing at its Biscayne Bay campus through a ground lease arrangement in which the developer financed and built the project, with rents capped by the university. Ownership will revert to FIU after debt repayment, giving the university new housing without upfront capital, while maintaining control over affordability.

But P3s also have real downsides. Universities often lose control over pricing, day-to-day operations, and house rules. Those decisions belong to partners focused on investment returns, not student outcomes. And these aren’t short-term arrangements, as many can be 30, 40, even 50-year contracts. A president who signs the deal in 2025 is binding whoever is in that role in 2060. The contracts themselves are complex. Most universities don’t employ people who’ve structured these deals before and have to rely on outside counsel, so they do not negotiate from a position of inexperience. Plus, there’s the community perception, such as parents asking whether their kids will be treated as revenue sources rather than students. Major donors worry that profit-driven housing contradicts what the university stands for. Either concern can cause changes in student applications or donations to dry up.

Making the Choice

Figuring out what works best for your program depends on what you need, what you can afford, and how fast you need it. Places like Stanford and Harvard have the money to build exactly what they want, designed around their specific educational priorities. But institutions facing rapid growth, constrained budgets, or urgent housing needs often find that P3s enable developments that would otherwise remain impossible.

Four questions should drive the decision between P3 and a university-built.

• First, do you need beds next fall, or can you wait a few years while navigating procurement processes?
• Second, can you cover upfront costs plus potential overruns, or is your capital already committed elsewhere?
• Third, does your team have the bandwidth to manage housing operations for decades, or should those people focus on other campus priorities?
• Fourth, which decisions must you own directly, and which can you live with a partner making?

Each project and program is unique, and it is important to choose the approach that fits your institution’s circumstances, capacity, and commitment to the student experience. Both paths can deliver quality housing if you understand what you’re gaining and what you’re giving up.

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Melissa Plaskonos, Vice President