Waiting to know how to access the remaining 660 million euro provided by the National Recovery and Resilience Plan (“PNRR”) for Student Housing.
Of the 960 million euros earmarked by the PNRR for Student Housing, to finance the construction of new university student housing (“PBSA”), today about 660 million remain to be used by 30 June 2026 with the aim of creating 52,500 new bed places.
While waiting for the law makers to define the framework and methods for accessing these funds, we would like to share below some thoughts.
The most accredited expectation is that the disbursement of the PNRR for Student Housing funds will largely take the form of subsidies to PBSA operators.
We believe that such a position is based on the two following main reasons:
- The reduction of operators’ costs due to PNRR subsidies shall translate into lower tariffs to students;
- It would ensure the full utilization of PNRR funds, which is today called into question by considerations such as:
- Many new PBSA projects have not yet been conceived or are in the early stages of the authorization process. With only three years to go before the deadline of 30 June 2026, it is unlikely that the relevant beds will be available by that date, a sine qua non condition for accessing PNRR funds.
- The available funds can only partially contribute to the realization of the number of targeted new bed places. In fact, 660 million euros distributed over 52,500 bed places means a little more than 12,500 euros per bed, a figure that represents perhaps a quarter of the construction costs (net of the cost of acquiring the area) of a single bed place.
Point 1) certainly has its validity. What is needed, however, is for the legislator to identify and assure controls on the implementation of effective mechanisms for transferring the operator’s costs reduction into lower tariffs.
Then it remains to be clarified how a subsidy to current expenses will translate in the creation of truly new bed places and not in a redistribution of them among segments of the PBSA market.
If this were not the case, it would open-up issues concerning the actual achievement of the PNRR objectives as well as possible market distortions. In essence, it is necessary to avoid that PNRR disbursements translate into financing current expenses instead of investments. From a macroeconomic standpoint this is particularly sensitive as 70% of PNRR funds will generate new public debt that, as such, must be repaid, sooner or later.
We therefore believe that it is necessary to direct PNRR funds, towards capital expenditures related to the construction of new PBSAs.
Point 2) a) describes a real problem, particularly acute in the ‘Italian system’. One of the objectives of the PNRR is precisely to act on the structural rigidities of the ‘country system’. Therefore, before surrendering to the ‘statu quo’.
It is necessary to fight, first and foremost involving local administrations, to ensure that authorization procedures for the construction of PBSAs benefit from a ‘fast track’.
This should concern, among other things, the possibility of converting disused hotels into student halls of residence.
Design characteristics of hotels are not that far from those of PBSAs, and therefore the work required to refurbish them could be limited and completed in a short time, compatible with the deadline of the PNRR.
Admittedly, most Italian hotels are undersized compared to what is required by a ‘state of the art’ PBSA.
However, the typical size of a hotel could fit with that of a “low cost” student residence (with a low service content) suited to the market characteristics and competitive in smaller cities: it could be an interesting investment opportunity for local operators, broadening the base of potential investors in student residences.
The objective of finding ways in which in three years we can go from the concept to the completion and opening of a PBSA has a general value: given the strategic importance of the right to study, it is perhaps worth considering the formula, certainly embarrassing from an institutional point of view, of appointing an extraordinary commissioner.
Point 2 b) requires finding the most efficient way of using funds to create the target number of bed places. There is little point in complaining about the fact that in the past the funds deployed per bed place were far greater: the sum still available is significant.
A direct contribution to the construction or refurbishment of PBSAs is the most obvious incentive to the creation of new bed places.
It lowers the amount committed by investors per bed place and thus generates more offer for a given return on capital. In a market economy, this also translates into a push to reduce prices, i.e. lower tariffs for student.
Conclusion
The above requires efficient markets, i.e. open to any qualified investor without significant discrimination.
If, in fact, PNRR funds were earmarked only for certain categories of operators, this would create market distortions that could dissuade some investors: PNRR funds could crowd-out capital market-driven investments with a net balance that could even be negative.
A paradoxical result if one considers the enormous imbalance between supply and demand that exists in student housing in Italy today.
Hence, it becomes evident what the qualifying characteristics of the law on PNRR funds for Student Housing must be: to define clear and certain rules for access to PNRR funds in a free market context. In this way the PNRR would become a catalyst for the investments that have long been looking with interest at the demand for Student Housing in Italy and the much-desired multiplier effect of the PNRR funds would be achieved.
