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Proponents say the practice can save time and money; critics worry about control and liability
You didn't have to look far to be reminded of the housing crisis at San Francisco State University. The 15story Verducci Hall, its largest dormitory, had loomed over campus like a ghost ever since being condemned after the Loma Prieta earthquake in 1989.
The university couldn't decide how to fix the building, or even whether it should. The federal government, asked to pay $14.5-million for repairs, balked at the cost. During the squabbling, nothing was done to replace Verducci 's 763 rooms. Some students were sent to live in abandoned military barracks at the Presidio, or at the former Treasure Island Naval Station, in the middle of San Francisco Bay. Some applicants from outside the Bay area who needed housing were denied admission.
Then, last fall, a proposal from the private sector changed the picture as radically as another tug from the San Andreas fault. The Catellus Development Corporation, of San Francisco, submitted a bid to build a $47.5-million student-apartment complex on the campus, at no financial risk to the university. San Francisco State is now one of a fast-growing number of institutions that have hired private companies to build and run their student housing.
A BOOMING INDUSTRY
Colleges and universities, especially public institutions, have rushed into privatized housing in the past five years. An industry source said he expected almost $500-million in privatized college housing contracts, nationally, to be signed this year. That compares with less than $300million last year, he said, and virtually none five years ago.
Developers of private housing promise many rewards and no risks. The college generally does not have to make any financial commitment up front. After construction is complete, a management company will operate the housing just like any other apartment complex, collecting enough rent to make a profit. In most cases, only students can be tenants, and the college gets to count the rooms as part of its housing stock. The parties insure that the contracts comply with state laws regarding debt and bidding by public institutions.
Universities generally agree to lease the land to the developer for the housing complex. The builder must secure financing, although universities often arrange through...