Let them borrow the money for dorms says LAO

Despite Shakespeare's reservations about borrowing and lending, the Legislative Analyst's Office (LAO) in a recent publication suggests that the legislature avoid even delayed grants for dormitory construction at UC, CSU, and the community colleges. Instead, it recommends that the dorms be built by borrowing the funds from the financial markets with repayment from student rents.

Of course, dorms have been built that way in the past, both by the universities and colleges, and in some cases by private developers. The purpose of budget grants is to make construction cheaper and, presumably, enable cheaper rents - basically a subsidy.

Particularly with regard to UC, where there has been legislative pressure to increase undergraduate enrollments, there is likely to be legislative resistance to the idea of dropping the grants. In view of that likely resistance, the LAO suggests an alternative of zero-interest loans for dorm construction. Zero-interest lending is a (much) lesser form of subsidy than grants, but still is a subsidy compared with external borrowing.

The LAO publication on dorms can be found at:

https://lao.ca.gov/reports/2023/4733/Student-Housing-030923.pdf.