Why is UMass asking a Wall Street giant to revamp its dorms?

Over the next few years, the University of Massachusetts will revamp dorms across its campus with a partner from private industry: American Campus Communities.

The nation’s largest student housing developer — a subsidiary of giant investment firm Blackstone — will lead a “comprehensive, long-range, and phased plan to modernize” dorms and amenities at UMass, using private money to fuel a major upgrade at the state’s flagship university.

It is the kind of deal that would be unheard of 20 years ago, but is typical today as cash-strapped schools tap the pockets of private developers to build and renovatemuch-needed student housing. The dynamic has fundamentally flipped who creates the rooms where thousands of young people in Massachusetts live.

These days, rather than financing dorm projects with their own budgets, universities partner with a cottage industry of private companies to fund furnished apartments on university-owned land.

The result: Towers that look, feel, and cost the same (or sometimes more) as dorm rooms, with outside employees taking on the role of resident assistants. Rent for the off-campus buildings is typically paid to the developer, not the school, even though university rulescan apply to the student residents.

Northeastern University, MIT, and UMass campuses in both Boston and Amherst are among the schools that have followed this model.

The projects, said Cherry Yang, a development manager at Jonathan Rose Companies who studied real estate development at MIT, are “mutually beneficial” for the colleges and the developers.

“Both parties can get what they want,” she said, “which is taking a potentially obsolescent piece of land and turning it into 500 rooms.”

Several companies specialize in these projects, but the biggest is American Campus Communities, responsible for almost 170 student buildings and about 14,000 beds nationwide. In 2022, Blackstone paid $13 billion to acquire ACC, because of its “long-term conviction” in student housing.

ACC erected a dorm-style apartment tower at NU named Lightview in 2019, three years after another private developer opened the East Village building there. In 2024, MIT opened Graduate Junction, a 675-bed graduate student dorm built and managed by ACC. And just in February, ACC started transforming a Northeastern parking lot at 840 Columbus Ave. into another dorm-style apartment building.

The financial structure has an undeniable appeal. As commercial real estate construction for offices and labs has slowed to longtime lows, student housing still attracts investors and usually turns a profit due to high demand.The calculation for developers, Yang said, is pretty simple: “If we build this by 2029, we think it’ll be leased up by the fall semester.”

(ACC declined to comment on the UMass deal or the other developments in this story.)

Partnering with private developers is also attractive for schools looking to add housing without taking on more debt. State-of-the-art dorms can help attract students, but fewer colleges have the resources or motivation to construct residential buildings that can cost upward of $100 million.

UMass Amherst, for example, cut department budgets and instituted a hiring freeze last year to avoid a deficit, before the ACC deal was announced.

Yet schools still face growing pressure from local officials to house more students, so they do not drive up rents for off-campus apartments. Boston alone projects a need for for undergraduate students at its universities.

Private dorm-style developments are plugging part of the hole, at a cost.

Schools typically sign a long-term lease for their land to a developer, who bears some or all of the construction costs. Increasingly, the outside company also operates the building, pays for utilities, handles maintenance, and sets and collects rent on behalf of the university.

In Boston, students can pay up to $1,700 a month per person to ACC and other private companies for a unit split with four roommates. Complaints about hidden fees and significant rent increases are common, and the rooms are often costlier than traditional dorms, according to a nationwide analysis from The Wall Street Journal.

Two years ago, MIT PhD candidate Suveena Sreenilayam chose to live in Graduate Junction, the university-affiliated ACC development, despite its $1,483 monthly price tag. She wanted somewhere safe and convenient to campus but ultimately was dissuaded by the shoddy furniture, the absence of in-unit laundry, and the simple realization that she could live better for $300 lessby moving off-campus, even in Cambridge.

She is moving out next month.

“I do think it’s kind of weird that a lot of these buildings are external entities utilizing the fact that students need somewhere to live and are willing to pay a lot, but they do not have the same benefits as on-campus housing,” such as meal plans, Sreenilayam said.

But student demand for private residential buildings is high, and vacancies are rare.

MIT spokesperson Sarah McDonnell said Graduate Junction is “a popular choice for our students, maintaining high occupancy rates and below market price points.”

The construction of these buildings can happen so closely with schools that Mary Ludden, Northeastern’s senior vice president for strategic initiatives, said she has helped choose the kind of bricks and lighting fixtures for 840 Columbus.

Northeastern signed a ground lease with ACC and will take an undisclosed percentage of the building revenue, but the developer will collect rent and pay for utilities.

“We really think that because it’s their core business, and they know how to build these kinds of residence halls — it’s a real win for us,” Ludden said. “When you work with a partner in a public-private partnership, there is shared risk.”

In Amherst,a December city housing production plan found that UMass houses about half of its 18,000 students, and a majority of the Town Council signed a letter in March urging the university to create more student housing.

But Darcy DuMont, a former Amherst town councilor, is wary of how much difference the ACC deal will make. The last private residential development UMass supported, an undergraduate building named Fieldstone, receives an educational property tax exemption, while still charging “high rents” to students, DuMont said.

Notably, she added, UMass is “promising not to lose any beds on campus, but they are not promising new ones” through the ACC agreement.

The specifics of the partnership are still undecided, though a UMass announcement noted that the “renovation or replacement of existing residence hall facilities” will happen “without the loss of current student housing capacity.”

UMass spokesperson Emily Gest wrote in an email the university will survey campus on its construction plans through the end of the year. The development team also includes Boston-based Elkus Manfredi Architects and Suffolk Construction.

Already, more than 60 percent of UMass students live in dorms and apartments on campus, a higher percentage than most other universities in the country.

“When there’s more to share, we will do so,” she said.

Daniel Shapiro, a UMass senior and leader of student advocacy group the Sunrise Movement, said the ACC deal is a step toward housing more students, but with lots of potential strings attached.

Shapiro himself was forced off-campus after getting unlucky in the student lottery and finds the Fieldstone building is too expensive for mostpeople he knows. He has lots of questions about UMass’s plans with ACC: How much will the units cost? he asked. And who will ultimately manage the buildings?

“Expanding housing for students is essential,” Shapiro said. “But how UMass does it also matters.”