Osservatorio Casa Abbordabile Milano Metropolitana (OCA)
DAStU, Politecnico di Milano, 16 November 2023
1_Context
The current student housing crisis must be addressed within a broader context: if housing unaffordability affects specific populations such as students and migrants more than others, the fact that the economic future of Italy greatly depends on these populations should make housing affordability a top political priority.
With Portugal, Italy is oldest country in Europe, with highest average age (48) in Europe. Italy is an ageing country, and a country in demographic decline. According to Istat
-in 2070 the Italian population will have declined by 12 million people (from 60 ML to 48ML)
-18-19 year-olds will shrink by 30% (337,000 individuals)
-at the current potential enrolment rate, universities could lose 91,000 students (-28%; – 45% the South) with major consequences on the higher education system (D. Cersosimo).
Another estimate predicts that the population aged 19 to 25 will shrink by 16% in next 20 yrs. Applying this forecast to current enrolment rates, researchers have predicted the enrolment rates in 2041 for each Italian province: universities in the South would lose more than one third of their current students, but the decline will affect all universities (mega-universities with more than 40,000 students will decrease from 12 to 7).
In this scenario, housing and education policies for young people in Italy should be a priority.
However, Italy spends less on educations than the European average.
Italy ranks second to last in the EU for the share of 25-34-year-olds with a university degree (29,2%) / EU target: 45% by 2030.
State underfunding of education and housing policies mean burdening families. According to Unione degli Universitari (Udu):
– away-from-home students spend 17,483 euros a year, 1,460 euros a month
– commuter students spend 9,777 euros a year, 865 euros a month
– students living with parents spend 9,364 euros a year, 783 euros a month
Housing costs account for a great part of students’ expenses.
Perhaps this is why 68% of university students live with their parents. This is highest percentage in Europe.
Only 5% of university students live in public or private student housing (compared with a European average of 17%, according to Eurostudent, 2021)
Especially after the Covid 19 pandemic, the housing market has become very tight: costs have increased also due to a lack of rental stock and a rise in demand. In May last year university students across Italy started protesting against the rising costs of housing, camping on university grounds. In fact, the first tent was set up at the Politecnico in Milan by Ilaria Lamera.
2_So what what has Italy done so far to improve the situation?
In Italy students receive public support (scholarships and housing) on the basis of income and merit; the criteria vary among regions. As said, only 5 percent of students live in public student accommodation.
L 338/2000
Since 2000, the state has allocated more than 1 billion euros through the Law 338,to finance 50% of the cost of creating new student housing units. Between 2001 and 2016, four callsfor implementation of Law 338 were published and 38,488 units have been financed.
Most of these units are managed by the regional public agencies and universities; a residual percentage of units is managed by private providers in so called ‘collegi di merito’ which offer extra personalized services.
– So far, student housing in Italy has been managed mainly by public regional bodies with a mission to promote affordable accommodation.
Private providers benefiting from state funds were obliged to allocate at least 20%of new housing units to low income eligible students. But it is unclear whether this obligation has ever been met because the Ministry for university and research does not provide this information.
There is a lack of coordination between the regional bodies in charge of allocating support to eligible students, and private providers managing the units: there is no oversight.
Nrrp
After the Covid 19 pandemic, Italy’s National recovery and resilience plan (Nrrp), Italy’s share of the EU’s recovery plan, was approved. With the Nrrp, Italy aims to fill the gap between demand and supply of student housing with an investment of 960 million euros for creating 60,000 new student housing units by mid-2026.
An intermediate target was set to complete 7,500 new units by 2022. Additional 52,000 units must be made available by May 2026, with the allocation of the remaining 660 million euros allocated to a so called ‘University Housing Fund’. For the implementation of the second phase, the Ministry issued a notice for the procurement of properties to be made available for student housing by various public entities.
The reform part of the Nrrp measure explicitly aims at increasing the supply of student housing by encouraging private entities. This main goal has proved very problematic.
3_Critical issues
The promotion of affordable housing and higher education are never specifically mentioned in any official document. The Nrrp, which led to the reform of student housing legislation, aims at “opening up the market to private investors and public-private partnerships”.
-The reform raised the percentage of state funding covering the costs for new and renovated units from 50 to 75%, also allowing student housing providers to benefit from a social housing tax regime.
-The Nrrp has provided for covering operating costs for new units for three years.
-The reform of student housing legislation cancelledthe obligation for private providersto allocate at least 20%of new housing units to low income eligible students; now new units must “primarily” be assigned to eligible students.
-No form of rent regulation has been put in place. The lack of rent control on private student housing is translating into higher than market rate rents, which also include extra costs for servicessuch as cleaning and laundry fees. Hence, we have seen cased where a single room in Milan costs 900 euros a month, 640 euros in Turin and 670 euros in Florence.
Rents are mentioned for the first time in the decree (1437/2022) setting out the criteria for the future definition of rents. The criteria are: the average unit construction cost in area, (according to Annex B of the decree 80,000 euros per unit in the North), real estate market values (!!!), the types of buildings and the quality of services offered to students (which respond to very high standard – luxury standards).
-A number of units in private residences can be leased to tourists thanks to a mixed use policy:by the Italian law units can be let out to tourists “when not required for student accommodation”. With no other criteria specified, in this model of student housing the boundary between hotels and student residences is increasingly blurred.
4_First results – Nrrp first phase
In February 2022 the government announced the completion of 9,179 units, through the first two calls for application, for a public contribution totalling 287 million euros allocated to public and private operators.
Two-thirds of the resources went to private student housing providers. The two leading private providers in Italy, Camplus and Campus X, received 106 million for 23 residences and 79 million for 7 residences respectively. All public entities benefit from 77 million.
Italy’s recovery plan subsidised not new mostly pre-existing private student accommodation, but it didn’t fall within the official public supply, in order to formally meet the first of two deadlines. According to Udu only 3.429 units out of the initial 7,500 are actually new. But there is no official data.
Funds were allocated for purchasing and leasing properties that already housed private student accommodation; these properties remain privately owned and are officially included within the public student housing supply for a nine-year period, after which they can change use.
With no rent regulation in place in many case advertised rents are above market rate.
The supposedly achieved target came under scrutiny by the European Union, delaying a 19-billion-euro payment requested by Italy. According to the Italian press, European officials ‘surprisingly’ came up with the question: “how do we verify that there units are really allocated to students and not rented out to others”?
In May the Minister’s spokesperson told me that the Ministry had “informally” imposed the allocation of 20% of new units to eligible students; but the figure kept changing. Apparently this obligation is contained in internal documents and is being applied, but there is no public data verify this.
After the European Commission’s findings, Italy amended the target of 7,500 units and replaced with a milestone (related to the awarding of initial contracts for providing new places in student accommodation); the milestone will be added to the fourth payment request. Now the unit value of this milestone is 519,5 million euros (and we have no idea why). Remember these are loans, to be reimbursed. It’s not clear why the figure jumped from 278 million, allocated in 2022, to 517 million euros.
More funds: the government has allocated another 261 million for creating student housing units. A fifth call pursuant to the ordinary funding path, Law 338, has been published and the Ministry announced the allocation of 500 million for the creation (renovation) of 5,400 new units to meet the target.
But the government does not intend to amend the general strategy for achieving the goal: funding private providers with no public oversight. Furthermore, it is unclear whether the public contribution will be attractive enough, because it will cover only a very small part of the cost for creating each new unit.
However, student housing in Italy falls within the category of social housing, a percentage of which must be built with each new real estate development. So instead of ordinary affordable ‘social’ housing, developers may be building student residencies which lack rent control. Hence Italy’s recovery plan could be facilitating financial real estate players within the newly deregulated student housing market.
European recovery funds are supporting private investments, but with no oversight on the final housing costs, not only are these funds not solving the student housing crisis, they are widening the gap between supply and demand of affordable student housing.
