Thursday, February 17, 2005

Free-Market Sliding-Scale

The University I attend has a massive shortage of on-campus housing, particularly for upper division students. While all lower division students are guaranteed housing (even if it is in a hotel down the street) upper division students are not. In past years, the method by which students get on-campus housing has been a lottery randomly assigning numbers to students, with lower numbered students getting first choice in housing. Furthermore, students living in upper division housing in their 3rd year may choose to stay where they are for subsequent years without the possibility of being pushed out, regardless of their lottery number. For obvious reasons, the student body is not particularly fond of the situation. Even those lucky ones who do get the on-campus housing they desire are unhappy, as their friends are left out in the cold.

The lottery system is not the worst option to solve the problem, but it obviously isn't ideal. People who want on-campus housing desperately do not get it while people who could go either way end up in classy apartments on-campus, simply by the luck of the draw.

Like with most problems of demand exceeding supply, the simplest solution would be to remove fixed prices and let the market dictate who is in and who is out. Currently, on-campus apartments are comparable to surrounding off-campus housing, but they carry some significant bonuses, such as furnishings, proximity to classes, a 9 month instead of 12 month lease, and a community of other students. These features make the value of the apartments far greater than they are currently valued at, which is why so many people desire to live there. Keeping the price artificially low is no different than rent control in New York. If the price is meant to skyrocket, then skyrocket it must.

This is not the total solution it seems. Certain students, particularly star athletes, have their entire tuition, room, and board paid for by the University. These students, whose on-campus housing costs would be covered regardless of cost, could afford these on-campus apartments regardless of the price, as they aren't actually paying for it themselves. This fact alone is sure to raise dissent. Furthermore, other students are all paying different rates of tuition dependent on the scholarships they have managed to achieve, so theoretically the students paying less for tuition have more to spend on housing.

By removing the fixed price of the on-campus apartments, we've created a sort of caste system whereby the star athletes with full scholarships and the academically advanced with academic scholarships are placed at a better position than the campus at large for this high demand housing. While at first I am not totally opposed to this system, as each individual who received a scholarship deserved it in some reason, it does not seem conducive to equality.

Instead, it is my suggestion that the University adopt a program where housing is priced at a percentage inversely related to the amount that each student pays in tuition. For instance, a student who pays $10,000 a semester would pay twice as much for the same on-campus apartment as the student who pays $20,000 in tuition. Students paying the average price of tuition would pay the market average price for the housing.

While I am normally opposed to such sliding scales in the realm of economics, I believe that here it is justified. When students look at the price of a university they are attending, they don't look specifically at the price itself, they look at the price they will be paying, that is, the price after scholarships and grants. For each student, the price of the same education is different, and no other commodity can boast this important element. Additionally, most students when first attending a university include in their calculations the cost of room and board (particularly in a university where on-campus living is a requirement for at least the first two years, such as my university), and this part of the cost can also be paid by scholarship. In short, one's housing is simply a part of total university cost.

By placing housing on the same sliding scale that tuition is placed on, we create a more balanced equality in the housing market. This way, housing is similar in value to the value of tuition. Of course the whole issue could be avoided by simply moving off-campus in the first place...

2 Comments:

Anonymous Anonymous said...

I don't agree with your premise. A number of people move off campus in order to save money. An on-campus apartment is more expensive than an off-campus house, provided that you do a decent job of shopping around to find your house.

-- Dingel

2:33 AM  
Blogger RCowan said...

You're right, on-campus housing is generally more expensive than off-campus housing. But it is undenyable that there is more demand than there is supply. I think there are a few factors that cause this.

First of all, for reference, upper-division housing is $2335 a semester. Divided accross 4 months of school, this comes to a rent of about $584, obviously high by any standards. If, though, we spread the rent accross 6 months (including half of the summer), the month rent comes to $389, something much more reasonable. Spreading the cost over 6 months instead of 4 isn't exactly a given, as one doesn't actually get the use of the on-campus apartments for, but is valid in the sense that most leases are full year agreements, and it isn't exactly easy to find a summer sub-letter. One of the biggest advantages to living on campus is not having to worry about sub-letting your apartment for the summer, assuming that you don't stay in Spokane.

Furthermore, the on-campus apartments are furnished, at least modestly. The same furnishings (bed, desk, etc.) even when bought on the cheap I'm sure would cost more than 200 dollars, which adds another $33 to our rent over 6 months, or $50 over 4. Additionally, there is the issue of utilities, which, depending on the house, can range from $40-$80 and month. For the sake of simplicity, let's assume $60 a month.

Lastly, on-campus apartments are very, very close to classes, a definate plus. Living further away, although it might be cheaper, could necessitate the need for a car, a huge expense. Even if you don't buy a car, then you have to admit that there is at least some ease in living so close to campus.

Given an average rent for off-campus living that is close to the university of around $320 a month, and we figure $33 dollars a month for furnishings and $60 a month for utilities, we're up to about $410 a month living off-campus, as opposed to $389 on.

Even, though, if it wasn't cheaper, there is a definite bonus in th simplicity of just going down to housing sign-ups and getting a place as opposed to scavanging for a place, bargaining for rent, going over a lease, dealing with negligent landlords, and the like.

Sure, you probably could, if you worked hard and got a little lucky, save some money on housing moving off-campus. But the ease the of the whole thing living on-campus more than makes up for it, and this is why demand is so high.

10:59 AM  

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