Colleges cannot afford to build student housing

Date Uploaded: 03/10/2016

Restrictive borrowing costs are preventing third-level colleges from building student accommodation.


But the Department of Finance believes it could fall foul of EU state-aid rules if it offers tax breaks or other incentives to make it more affordable for universities to build complexes themselves.


The issue has arisen in pre-budget discussions with finance officials at a working group led by the Department of Education. It was set up a year ago to try and support the development of badly-needed student accommodation, particularly projects on campus or developed by colleges themselves.


A September 2015 report by the Higher Education Authority showed that around 25,000 third-level students are competing in the private rental market.


In the absence of further capital investment for works on or near campuses, universities require cheap borrowing to be able to provide student apartments at costs that would allow them charge affordable rents.


At the May working group meeting, University of Limerick said the cost of capital is the single biggest issue. It hopes to deliver spaces for 450 more students by 2019, but said that reducing the cost of capital to 2% or lower would make it much more financially-viable for third-level institutions.


The Irish Universities Association has proposed tax breaks or other incentives for colleges, such as refunds of Vat on development costs. It said universities could provide 10,000 extra bed spaces within five years if appropriate initiatives are put in place by the Government.


But such measures might not be as straightforward as they hope, according to minutes of the working group meeting in May.


“Department of Finance indicated that there is no evidence of market failure, particularly in the Dublin region, given the level of interest demonstrated by private developers and that we need to be wary of state aid rules if market interventions are made that crowd out private sector development,” said a note of the meeting, released under Freedom of Information law.


The European Investment Bank has already financed capital projects for colleges here, and the Higher Education Authority has begun talks with it about the possibility of stand-alone financing solely for student accommodation. Third-level institutions and the Department of Education have also been in discussions with other government departments on alternative finance arrangements, a number of obstacles remain.


Nama has facilitated the sale of property for schools, healthcare and public uses by giving public bodies first option on purchases. But officials of the agency told the working group last November that these must be at assessed market valuations.


There have been discussions about sites or conversion of existing properties, held as security on loans in Nama’s control, for use as student accommodation in Cork, Dublin, Galway and Limerick. But universities have said that the commercial requirement puts such transactions beyond their budgets at currently-available borrowing rates.


Journalist: Niall Murray

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